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Iran-Pakistan Pipeline:

Iran's New Economic


Lifeline
GAL LUFT
Asif Qamer

Outline
Project Profile
Energy Statistics of Natural Gas
Facilities
Energy Needs of India and Pakistan
Reasons for India and Pakistan to shift to gas
From IPI to IP
Why IP Pipeline Project is Crucial for Iran and Pakistan?
Implications for the great powers
Strategic alternatives
Economical aspects
Conclusion
Project Profile
The idea to export gas to India and Pakistan, first was introduced by
Iran in 1989.

The 2775-km land pipeline will connect South Pars fields in Iran via
Baluchistan.

In Indian border it will reach to Barmer, Rajasthan to New Delhi.

Initial cost was $4 billion . In 2007- it was approx $ 7.4 billion.

Initially it would supply ~60 million cubic meters of gas per day to
India and up to 30 million cubic meters per day to Pakistan.

Officials of India, Pakistan & Iran met in August 2006 to discuss
pricing of gas.

Tentatively scheduled to begin much-delayed pipeline construction is
in September 2009 and be completed by 2014.
The Route
Energy Statistics of Natural
Gas
Country Natural Gas Reserves Natural Gas Production
Natural Gas
Consumption
Pakistan 31.266tcf (2009) 1,324bcf (2008) 1,324bcf (2008)
India 37.960tcf (2009) 1,137bcf (2008) 1,518bcf (2008)
Iran 111.940tcf ( 2009) 6,372bcf (2008) 446bcf (2008)
Source: Energy Information Administration Official Energy Statists from
the U.S. Government - http://tonto.eia.doe.gov/
Facilities Iran


Development of gas from Southern Pars Fields Iran.

The field is the biggest gas field in the world, shared between Iran and
Qatar, which contains 1800 tcf.

Daily gas production rate of 800mmscf/d (Million Standard Cubic Feet
per Day)


At least a 1100 km, 48 pipeline from Southern Pars fields and
supporting facilities from Assaluyeh to Pakistan border.
Facilities Pakistan

Laying around 1000 km of 48 pipeline and other facilities.

Construction of necessary infrastructures, like domestic
transmission, distribution and others to support continuous
consumption the committed off take gas.


Facilities India

Laying around 500 to 600 km of 36 Pipeline and other facilities.

Construction of necessary infrastructures, such as domestic
transmission, distribution and other networks to support the
continuous consumption of the committed off take gas.

Energy Needs - Pakistan
Pakistans energy needs almost doubled during last 8 years
due to large-scale industrialization
Energy Crises in Pakistan
Pakistans dependence on Gas
Sui gas field accounts for 26% of Pakistan's gas production.
Reserves are estimated to be at about 2 trillion cubic feet
(tcf).
Daily production is around 660 million cubic feet.
Out of total energy needs, 45% gas, 42% oil, 10% hydro and
3% coal.
Imported around $ 4 Billion crude oil and products in 2005.
Consumes around 2.6 BCFD now and intends to increase to
5.5 BCFD in 2010.

Energy Needs - India
The largest democracy in the world.
India is the seventh largest consumer of energy.
Natural gas consumption now 1518bcf.
Power shortage of 11% of demand.1










1. Powerlessness; Indian electricity.(India's power shortage), Economist (US), The, June, 2005
(Countryside is without power around 8 hours a day.)



Reasons for India and Pakistan to
shift to gas
To meet the energy requirements.

Reduce import of petroleum products.

Cleaner fuel, comparing to oil and coal.

Use in transportation.

Use in power generation.

Use in industries.

Use as feed to fertilizer plants

Increase in households.

Relief to congested infrastructure in ports, roads, railways used to
move petroleum products.
From IPI to IP
US-India nuclear treaty.
Irans relations with India.
Rift between Iran and America.



Why IP Pipeline Project is Crucial for
Iran?
Iran: Underdeveloped economy, functioning well below potential
Substantial Energy Reserves
2
nd
Largest NG Supply Potential in World
Substantial oil reserves; using gas injection to maintain output

Location between Europe, Middle East, Central Asia, and South
Asia: Hub between largest suppliers and largest users.

Iran wants to promote it to undermine US objective in the region.
Cash Starved despite oil revenues investment & technology
constrained, as is ability to maintain social subsidies.
Iran can play and demonstrate its role in matters of interest in the
region.
Americas sanctions to invest in the Iran.
Iran wants to be true regional power, overcome Western constraints
Breakout to the East, South Asia & China.
The New Geopolitics of Gas: the rise of Gas OPEC.

Why IP Pipeline Project is Crucial for
Pakistan?
Energy reserves fully domestically committed.

Limited effective demand for energy imports.

Land Bridge: Middle East - Central Asia and South Asia.

Pakistan finds in opportunity to underline its significance in the
region.

Growing energy deficit NG is 60% of use, Fully absorbing internal
supply need for import.

Solution to energy security challenge.

Transit fees.


Why IP Pipeline Project is Crucial for
India?
India: Rapidly growing (emerging market) economy facing
substantial internal institutional barriers.

Potentially worlds 2
nd
largest consumer of NG and LNG
Located far from adequate supplies.
China major competitor for supplies.
Need secure and growing supply of energy.

By 2030 it is expected to become the third largest consumer
of energy, overtaking Japan and Russia.

Potential (insufficient) supply from east: Bangladesh, Myanmar.

Middle-East, Central Asian supplies by pipeline must pass
through Pakistan, or under ocean (up to 3000m depths).

Implications for the great powers
Intense geopolitics.

Rift between America and Iran.
Stephen Cohen says, India needs American investment and
technology.

Tensions between India and Pakistan.

Americas ability to check Iran's hegemony.

Diplomatic setback for USA.

For Russia it is an opportunity.

Potential gain for China.


Strategic Alternatives - Iran
Export for revenue & to break isolation, through IPI.
Export to Europe through Turkey; politically constrained
I I pipeline under sea to India; extremely costly, technologically
complex
LNG to world market; requires substantial investment as well as
political opening
Currently lacks necessary technology; sanctions
complicate acquiring it.
Reserve for the (Islamic) future
Domestic use
Limited export to Pakistan and/or Islamic clients.

Strategic Alternatives - Pakistan
IPI Provide Transit for Gas to India.

Generate substantial transit revenues.

Acquire needed energy input at low cost.

Requires investment in Infrastructure security.

Acquire leverage in relations with India and Iran. Look to Qatar, Iran,
or TAP for needed increase in gas supply.

China factor.
Strategic Alternatives - India
IPI Meets new energy need: Iran via Pakistan
Lowest cost alternative
Subject to Pakistani interruption or internal turmoil
Dependent on Iranian reliability
Undersea Pipelines from Iran and/or Qatar
Extremely expensive and technologically risky
Iranian reliability issue
LNG from Qatar (world market)
Requires substantial domestic infrastructure development
Market still underdeveloped, if promising
(Partial) Supply Alternatives; Diversification of sources
Bangladesh & Myanmar Pipelines
Turkmen gas (TAPI), also through Pakistan: 70 bcf/yr (1.98bcm)?
Develop Nuclear Energy Industry (French model) with U.S.
Assistance [currently only 3% of power generation]
TAPI to the rescue?
More than one way to supply gas.

Turkmenistan-Afghanistan-Pakistan-India (TAPI).

Expansion to connect other fields.

TAPI is not as vulnerable like IPI.

But TAPI needs stabilized Afghanistan.

Economical aspects
Low cost alternative for NG supply
Allows range for flexible pricing agreement
Satisfies India & Pakistan NG needs over 25 year horizon, and
Pakistani/ Iranian revenue needs.
Satisfies key Iranian strategic objectives.
Raises economic costs of political conflict; confidence building
measure between competitors.
The possibility of having a 2,775 kilometer pipeline with a
diameter of 44 inches49 that can help India save $300 million per
year in energy transport50, and about $10 billion over a decade
because of cheaper gas through a gas pipeline51 with a volume
capacity of at least 3.2 billion cubic feet per day.
For Pakistan, this gas pipeline is worth $14 billion of income over
30 years and $700 million of income every year through transit
fees from India.
Economic Lifeline for Iran.
Recent Developments
Last year, as a result of India signing the US-India nuclear treaty,
based on a US Congress law which suggests that India follow the
American line on Iran, India officially quit the pipeline deal.

On 24
th
May, 2009, Pakistani President President Asif Ali Zardari and
Iranian President President Mahmoud Ahmadinejad signed a
framework agreement in Tehran which will lead to a formal
agreement on the building of a pipeline.

The 2,000 km pipeline, shared half and half by the two countries, will
not go through the troubled area of Khuzdar in Baluchistan but will
enter Pakistan from its border near Gwadar and go to Nawabshah in
Sind, which is the hub of gas pipelines in Pakistan.
Pakistan will receive one billion cubic feet of gas from this pipeline.

Change in Transit route war.



Conclusion
The political will on Iran, Pakistan and India are strong and the
sense of momentum has been increased.

Increasing gas demand projections in both Pakistan and India.

A number of major issues remain to be resolved - which mean that
June framework agreement continues to look optimistic.

Without active US participation in the effort to alleviate Indias
energy poverty, Iran could soon become to India what Russia is to
Europe.

For Pakistan, it is still not too late to mull its energy security strategy
and examine alternatives to Iranian gas.





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