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Pakistan may abandon IPI project
Thursday, January 15, 2009
By Khalid Mustafa
ISLAMABAD: Authorities concerned may recommend to parliament to abandon the proposed $7.6 billion IPI gas line project here in the meeting of the steering committee that meets today (Thursday) with Adviser to the Prime Minister on Petroleum Dr Asim Hussain in the chair.
The irrational demand by Iran, seeking exorbitant price of $10-11 per mmbtu gas from Pakistan under the proposed project, has left the authorities concerned, who have been part of the dialogue on this mega gas line for the last 14 years, in the lurch as this project remains no more economically viable for Pakistan.
In Wednesdays meeting of the steering committee, all the top brains of the government would discuss the pros and cons of the irrational demand of Tehran with regard to the gas prices and other related issues.
After formulating the recommendations about the future strategy with regard to the much trumpeted gas line, the said committee would sensitise parliament on the issue and leave it to the House to take a decision, either to prolong the dialogue on the demand of Terhan or quit the project.
The official said that Pakistan and Iran had earlier agreed on $6.66 per mmbtu price in December 2007 for the gas to be imported through the mega gas line. The official said that Ministry of Petroleum and Natural Resources earlier briefed Prime Minister Yousuf Raza Gillai some three months back and advocated for abandoning the project keeping in view the irrational demands of Tehran. In that particular meeting, the ministryís top man recommended to the government for aggressive exploration and production of oil and gas in the country.
He said the new exploration and productionpetroleum policy 2009 with alluring incentives would definitely accelerate the investment in the oil and gas sector. Pakistan is rich in oil and gas, particularly Balochistan. If the government manages to enforce its writ by giving the ownership feeling to the local people, then aggressive oil and gas exploration can be carried out. This is the only way left for Pakistan to cater to the energy needs of the country.
To a question, the official said that a complete failure in the ongoing talks in Tehran was realised when Dr Asim recently visited Iran. The deadlock in the talks is a setback for the energy starved Pakistan, as both the countries had initiated the negotiations some time in 1992-93, and there still seems no light even at the end of the tunnel with regard to initiating the work on the ground.
The official, who was a part of the delegation during the talks, said that both sides remained stuck to their stances and failed to iron out the rifts over the price mechanism. Iran actually backed out of the Gas Sales Purchase Agreement some months back, shocking Pakistan, and came up with new proposals for selling gas under the IPI project. Since then, no progress has taken place on the IPI issue.
Other than the massive hike in gas prices under the proposed project, Iran wants that in case gas supply to India is wilfully disrupted by Pakistan, then Iran will reduce supply of gas to Pakistan in the same proportion.
Tehran also wants Islamabad to allow one price review before the IPI project gets operational. Under the proposal, Iran will be authorised to re-open the price formula even before the commencement date of the project. This would trigger complete uncertainty in the prices of piped gas to be imported.
Iran wants to move the price formula closer to spot market prices, rather than long-term contract prices that is imperative to establish the viability of the project. However, Pakistan is of the view that uncertainty in gas price will make the IPI project economically unviable. Pakistanís stance is that the price of imported gas must be competitive to alternate fuels in the Pakistani market.
Thursday, January 15, 2009
By Khalid Mustafa
ISLAMABAD: Authorities concerned may recommend to parliament to abandon the proposed $7.6 billion IPI gas line project here in the meeting of the steering committee that meets today (Thursday) with Adviser to the Prime Minister on Petroleum Dr Asim Hussain in the chair.
The irrational demand by Iran, seeking exorbitant price of $10-11 per mmbtu gas from Pakistan under the proposed project, has left the authorities concerned, who have been part of the dialogue on this mega gas line for the last 14 years, in the lurch as this project remains no more economically viable for Pakistan.
In Wednesdays meeting of the steering committee, all the top brains of the government would discuss the pros and cons of the irrational demand of Tehran with regard to the gas prices and other related issues.
After formulating the recommendations about the future strategy with regard to the much trumpeted gas line, the said committee would sensitise parliament on the issue and leave it to the House to take a decision, either to prolong the dialogue on the demand of Terhan or quit the project.
The official said that Pakistan and Iran had earlier agreed on $6.66 per mmbtu price in December 2007 for the gas to be imported through the mega gas line. The official said that Ministry of Petroleum and Natural Resources earlier briefed Prime Minister Yousuf Raza Gillai some three months back and advocated for abandoning the project keeping in view the irrational demands of Tehran. In that particular meeting, the ministryís top man recommended to the government for aggressive exploration and production of oil and gas in the country.
He said the new exploration and productionpetroleum policy 2009 with alluring incentives would definitely accelerate the investment in the oil and gas sector. Pakistan is rich in oil and gas, particularly Balochistan. If the government manages to enforce its writ by giving the ownership feeling to the local people, then aggressive oil and gas exploration can be carried out. This is the only way left for Pakistan to cater to the energy needs of the country.
To a question, the official said that a complete failure in the ongoing talks in Tehran was realised when Dr Asim recently visited Iran. The deadlock in the talks is a setback for the energy starved Pakistan, as both the countries had initiated the negotiations some time in 1992-93, and there still seems no light even at the end of the tunnel with regard to initiating the work on the ground.
The official, who was a part of the delegation during the talks, said that both sides remained stuck to their stances and failed to iron out the rifts over the price mechanism. Iran actually backed out of the Gas Sales Purchase Agreement some months back, shocking Pakistan, and came up with new proposals for selling gas under the IPI project. Since then, no progress has taken place on the IPI issue.
Other than the massive hike in gas prices under the proposed project, Iran wants that in case gas supply to India is wilfully disrupted by Pakistan, then Iran will reduce supply of gas to Pakistan in the same proportion.
Tehran also wants Islamabad to allow one price review before the IPI project gets operational. Under the proposal, Iran will be authorised to re-open the price formula even before the commencement date of the project. This would trigger complete uncertainty in the prices of piped gas to be imported.
Iran wants to move the price formula closer to spot market prices, rather than long-term contract prices that is imperative to establish the viability of the project. However, Pakistan is of the view that uncertainty in gas price will make the IPI project economically unviable. Pakistanís stance is that the price of imported gas must be competitive to alternate fuels in the Pakistani market.
