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IP Gas Pipeline: A road to stability

Paper No. 5547                                         Dated 19-Aug-2013

Guest Column by Muhammad Nawaz Khan

Pakistan is facing an acute energy crisis and there is a huge gap in demand and supply. Pakistan, being an energy deficient country, is hugely suffering both economically and socially.

Since gas is the cheapest source of energy production therefore, Iran-Pakistan gas pipeline (IP) project will address Pakistan’s socio-economic problems. The question arises that how can best Pakistan get the best advantages out of geopolitical and economic imperatives of IP gas pipelines project. IP gas pipeline project is akin to peace project and would enable Pakistan to pull itself out of darkness.

 The future prospect of IP gas pipeline is very bright as related to Pakistan but it is not a future of IP but it is a future of Pakistan. In fact a choice is in between the darkness and a prosperous future of Pakistan. IP is not only beneficial for Pakistan but also crucial for Iran and region as well. It is also worthwhile that the importance of IP agreement which Islamabad can extend this IP gas pipeline project by including the 3rd party to get royalty. In this regards, the possibility of extension of IP to China and India is also bright. Pakistan can become an ‘Energy Corridor’ in the region due to its crucial geo-strategic location. For importing gas from Iran Gwadar port plays an important role for the transformation of gas. Since, Pakistan is highly reliant on gas which constitutes over 34% of the resources is being used for electricity generation.

The current energy scenario of Pakistan is very bleak in this regard currently 63 million tons of oil is being spent by Pakistan on annually basis, which is 28% of the total energy, out of that 78% oil is imported only 22% is the indigenous production available to Pakistan, moreover 44% gas, 15% electricity, 11% coal, and just 15% LPG are available to Pakistan. So the major consumption of source in Pakistan is natural gas which is witnessed to increase 7.7% during the last five years. Therefore there is very heavily reliance on gas which constitutes almost 48% of Pakistan’s energy mix. The fuel oil import bill was $ 12 billion during 2011-12 which is projected to raise $ 13 billion by the next year and by 2020 it will be almost 45 to $ 50 billion. The demand of oil and energy is going to reach almost 122 million metric tons of energy by 2021-22. It means almost 3 fold increase would be in energy demand and out of that only 63 million metric tons of oil is being produced locally. That shows still almost 38-40% are going to be imported in next 15 years.

Since Pakistan maintains a business as usual attitude i.e., lack of management; lack of effective consumption policy or producing new energy recourse and lack of efficiency therefore Pakistan is going to have face a big challenge in terms of energy crises which are not only producing economic unrest but also brought political instability in Pakistan.  Currently 700 million cubic feet of gas is being consume daily in Pakistan which is going to rise 1500 million cubic metric by the end of this year and oil likely having 7%  increase  would be cause of many folds that shows at least it will rise to 4 billion cubic feet by 2025. Currently Pakistan is facing the shortage of 5 thousand to 6 thousand megawatt of energy which is resulting in gas load shedding etc. According to the US Information Administration that Pakistan has 28 billion cubic feet of gas which is projected 2007-8 for the last 20 years but the current scenario predicts that Pakistan would be exhausted these energy recourses by 2020. In order to avoid such kind of scenarios there are four external options available to Pakistan of energy production besides the domestic energy and cost efficient and management i.e., IPI-IP overland, TAPI overland, Qatar-Pakistan undersea and LNG. The viable and cheapest option is IP.

IP project started in 1995 lately reached in 2008. Initially the budget cost was $ 4 billion now it reached to $ 8 billion. Furthermore, in 2010 agreement was signed in which both the parties focused on the need of IP gas pipeline which is considered for the economic survival of Iran, and it is also an energy lifeline for Pakistan. After signing this project there was the consensus build up by the Iranian government that if this project would not be completed by the end of 2014 then Pakistan has to pay $1 million dollar to Iranian government as a plenty.

On the other hand US is currently embodied in Afghanistan from the past few years and it’s withdraw cannot be successful from Afghanistan without the involvement of Pakistan. So US have to realize the geopolitical importance of Pakistan and should help in constructing the IP project rather than opposing this gas pipeline project. As Iran is exporting 6 to 9 billion cubic metric gas to Turkey and 1 billion cubic metric to Armenia which in the future will rise to 2.3 billion cubic metric. So the question arises that if the gas is being exported to these two states without any objection to the US then, why there is an objection regarding the construction of IP gas pipeline project to the US?

Iranian gas reserves are the second largest with 51 trillion cubic metric and in the wake of huge gap between supply and demand, Pakistan can meet its 75% of energy need through IP project and which would be available for 20 years. This project will also help in reducing the unemployment in Pakistan while giving jobs to the people of Baluchistan and Sindh. Besides, that Iran is also interested in opening the oil refinery in Gawadar with a production of 4000 barrel of oil. Pakistan imports 78% of oil from abroad and IP would cost $3billion to Pakistan but it would reduce oil imports by $5.3 billion, and help buy oil for another $2.3 billion, thus saved. He also focuses that not only IP but Qatar, TAPI and LNG all should be formed and flourished.

Pakistan should materialize the project since it is facing serious energy consequences if Pakistan does not go for this gas pipeline project then it will face more serious consequences therefore, Islamabad have to look after its national interests. So the option is in the hands of our own decision making-political elite that whether they need a “PROSPEROUS AND DEVELOPED PAKISTAN” or a “DARK PAKISTAN” and this project is in the best national interest of Pakistan.

(The writer works at Islamabad Policy Research Institute.  E-mail: nawazverdag915@hotmail.com)

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