US sanctions on Iran could figure in the comprehensive discussions between Pakistan and Washington on energy cooperation next week. Pakistan is keen on the Iran gas pipeline, which has been held up due to lack of investment after the sanctions and also doubts from the Iranian side about its viability.
Ministry of foreign affairs spokesperson confirmed on Sunday that the delegation will be led by Minister for Petroleum Shahid Khaqan Abbasi and Minister for Water and Power Khwaja Asif, who will travel to the US for a meeting of the working group on energy.
News reports say that Iran was now willing to renegotiate the export price of gas to Pakistan after a recent statement by its oil minister that the peace pipeline project was likely to be annulled.
The Pakistan government said it was committed to the project and was exploring all means of sourcing energy keeping in mind the acute shortage. It had asked for a clarification from Iran on this issue. Federal Minister for Petroleum Shahid Khaqan Abbasi said that no official word had come from Iran on scrapping the project. There was an agreement signed between Pakistan and Iran for the gas pipeline and it cannot be called off unilaterally. The government had asked for a clarification and also a meeting to discuss the project and its future, he said. The meeting could be held later in November depending on when Iran responds.
Earlier, Pakistan had asked Iran for 2 billion USD to fund its share of the project. The pipeline project is facing flak for not negotiating a proper price for gas, which is linked to international crude oil prices. There are provisions for heavy penalties if the Pakistan government does not fulfil its share of building the pipeline for which it had last month sought funds from Iran. Mr. Abbasi said these issues, including the penalty clauses will have to be discussed when the meeting with Iran takes place.
The government was confident of signing a construction contract for the pipeline but that will remain in limbo till the Iran government gets back on the issue. Mubin Saulat, managing director of Interstate Gas Systems Limited, a public sector company, said while most of the 1100km portion of the pipeline in Iran is complete, financing the project for Pakistan was a challenge. But there were other positive developments in the project for instance, the design was completed.
While the construction should have started by now, he said it was not was rocket science and if everything falls into place, the project could be completed as scheduled next year end. “It's challenging but not impossible,” he added.
He said Pakistan is also looking at its huge gas reserves in Sui in Balochistan and in Sindh and if the investment environment is good then there may not be a need for imported gas. At present the production of gas is 4 billion cubic feet a day (BCFD) while the demand is six BCFD. This could double in ten to 15 years time. Pakistan uses gas – the bulk of it for domestic use but 50 per cent of its energy comes from natural gas. According to the agreement with Iran signed in 2009, Pakistan should get one billion cubic feet a day (BCFD) from the pipeline project. This along with the proposed Trans Afghanistan Pipeline or TAPI pipeline in which India is involved, should be able to meet its shortage of 2 BCFD. The company was also pinning its hopes on the TAPI project, which if completed in the next four to five years could deliver 1.3 BCFD.