Iran Pakistan Gas Pipeline Essay Contest

H.E. Amanullah Khan Jadoon, Federal Minister for Petroleum and Natural Resources of Pakistan, outlines in this special article for the IEFS Newsletter his country's two-pronged strategy for enhancing gas supplies in support of economic development: accelerated domestic exploration and imports through pipelines and in the form of LNG. He underscores that not only Pakistan, but the whole South Asia region will benefit from the Iran-Pakistan-India pipeline project as it will provide a foundation for future economic growth, peace and co-operation as well as contribute to more gas-driven and environment friendly energy economies of two major energy consuming countries.

Federal Minister for Petroleum and Natural Resources since September 2004, Mr Jadoon is an elected Member of the National Assembly representing the Pakistan Muslim League. He has earlier served as Federal Minister for Kashmir Affairs.

Pakistan's energy mix is dominated by oil and gas. Together they contribute 80% of 56 million tonnes of oil equivalent (MTOE) of primary energy supplies. The other sources include 8% coal, 11% hydro electricity and 1% nuclear electricity.

According to Government's projections in the Medium Term Development Framework (MTDF) plan, Pakistan's energy requirement will increase to over 360 MTOE in the next 25 years, more than half of which will have to be imported. Although according to this plan, contribution of oil and gas is projected to drop from the present 80% to about 64%, natural gas is still expected to meet 45% of the primary energy needs at the end of the twenty-five year period.

Pakistan is exploring various options to enhance its gas supplies which are assured, affordable and sustainable on long-term basis so as to maintain the current pace of economic development. To meet this challenge, Pakistan has adopted a two-pronged strategy focusing on: (a) accelerating domestic exploration efforts with more attractive package of incentives for producers; and (b) import of natural gas through transnational pipelines and in the form of liquefied natural gas.

One of the viable gas import options being pursued by Pakistan is import of gas from Iran to Pakistan and its extension to India. Iran as the owner of the world's second-largest proven natural gas reserves is keen to exploit this resource as a source for its revenues. The biggest potential customers of Iranian gas so far are Pakistan and India.

The Iran-Pakistan-India gas pipeline project envisages laying of 2,200 km on-land pipeline to transport gas for both the countries. The total cost of the project was estimated to be over USD seven billion in 2006.

Pakistan's Ministry of Petroleum and Natural Resources has constituted separate working groups with Iran and India to deliberate upon technical, legal, financial and commercial issues of the project. The working groups have held several one-to-one as well as joint meetings so far. Despite the complexities that naturally involve negotiating and executing such a project, progress has been achieved on key components of the project like signing of the term sheet, consensus on major items of the gas sale purchase agreement, broad understanding on project structure, and appointment of international advisors. A Pakistani advisory consortium led by PricewaterhouseCoopers has almost finalized pre-feasibility reports for the Pakistan segment of the project.

Further negotiations of the three parties are in hand to finalize this venture. The degree of earnestness displayed by all the parties, since all will benefit from it, allows us to assume an optimistic conclusion of the project.

Benefits to Pakistan

For Pakistan, the replacement of imported oil with imported gas will increase energy security both in terms of security of supply as well as security of price in view of the long term contract with dedicated source of supply and guaranteed consumption. It will give relief to the hard-pressed infrastructure of ports, roads and railways which are used in movement of imported oil upcountry. In addition, Pakistan will have a strategic advantage as a transit country.

Regional Prosperity

The South Asia region will benefit from the Iran-Pakistan-India pipeline project as it will provide a foundation for future economic growth, peace and cooperation throughout the region.

It will result in a shift towards more gas-driven and environment friendly energy economies of two major energy consuming countries. Significant direct and indirect economic benefits during the construction and over the life of the project will be generated through employment, transit fees, availability of clean fuel, economic and industrial growth. The project will create major investment opportunities for the entire region including downstream business.

A dozen villagers from Balochistan’s Kech district protested recently in front of the national press club in Quetta, the provincial capital, over an “unprovoked attack” by Iranian border guards in the Kech area of the troubled province.

The protesting villagers, who live close to the border with Iran, said that they had been trapped within their homes, frightened by heavy fire from Iranian border guards.

In the village of Zamuran, on the edge of the Goldsmith Line, people were confined to their houses because of heavy Iranian firing, the protesters say.

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“We are terrified. We can’t go to our working places and schools,” Mohammad Hanif, chairman of protesting villagers told The Diplomat during the protest in Quetta.

Hanif said that at least 42 rockets were fired by Iranian security guards into the Zamuran area of Balochistan’s restive Kech district, wounding at least seven civilians and spreading fear and uncertainty among the villagers.

He said that Iranian border guards started firing the rockets around 4:00 a.m. and stopped at 10:00 a.m., claiming that the rockets were fired into the civilian population from very close range. A large number of houses and shops in the area were turned to rubble due to the heavy firing. The victims were taken to the district hospital in Turbat for treatment.

Zamuran is situated very close to Iran, and villagers frequently cross the border into Iran for business. However, the shelling kept residents confined to their houses. Another protester, Habib Baloch told The Diplomat, “We are very afraid of our business which is directly connected to Iran. We want this firing to stop forever.”

Habib, who travelled 1200 kilometers to Quetta to attract the attention of provincial authorities, added, “We will go back if only Balochistan government ensures our security otherwise.” He noted that there had been a constant movement of Iranian border guards near the border.

“We and our children are not safe in these conditions, we want peace,” he said.

Residents of villages of Pakistan’s Balochistan province living near the Goldsmith Time have several times reported heavy firing and heavy shelling coming from the Iranian side of the border. Officials from Panjgor and Kech districts say a large number of families have been compelled to flee their villages to escape the rockets, which have injured dozens of civilians over the past month.

Pakistan’s national media have regularly carried reports of Iranian border guards entering Pakistani territory in raids against militants. The reports have created anger towards Iran among Sunni religious parties, who see the raids as an attack on Pakistani sovereignty. The anger is being expressed everywhere from Friday congregations to Twitter.

The protesters outside the press club in Quetta pledged that if the cross border attacks don’t stop they will take their protests across the province. A provincial minister, who wished to remain unnamed, told The Diplomat that the Balochistan authorities would protest formally to Tehran against the latest incursion.

“Chief Minister Dr. Abdul Malik Baloch is in talks with the Iranian authorities in this regard. If our bilateral discussion regarding this issue brings no result, we will refer this issue to the federal government,” he said.

According to sources, the rockets were allegedly fired in retaliation to an attack by militants on an Iranian checkpoint in the Koh-e-Sor area inside Iran that killed three Iranian officials. An Iranian border official claimed that the gunmen fled back into Pakistani territory, although Pakistani officials have denied this claim.

In November 2014, the Foreign Office of Pakistan lodged a strong protest with Iran, after the neighboring country’s border guards stormed into Pakistani territory and killed a security official.

Security on both sides of the border has tightened in the aftermath of deadly attacks carried out by Islamist militants of Jaish-ul-Adl, (Army of Justice), a little known Islamic militant organization that accuses Tehran of sending members of its elite Revolutionary Guards to fight the opponents of President Bashar al-Assad in Syria.

Pakistan and Iran, which share a porous 900 km border, have recently agreed to tackle the terrorist threat along the border.

Sources in the Balochistan Home and Tribal Affairs Department said that the two countries have decided to joint forces to fight terrorism, narcotics, and human smuggling. They have also pledged to bolster trade with the help of Chinese multinationals.

Gas Pipeline

This latest rocket attack on Pakistani territory by Iranian border guards coincided with suggestions of movement on the long delayed Iran-Pakistan gas pipeline project. Media reports in late December suggested that Pakistan has convinced Iran not to invoke a penalty clause for the delay in Pakistan’s section of the pipeline – attributable to the international sanctions on Iran – although Iranian Oil Minister Bijan Namdar Zangeneh subsequently denied this.

Iranian President Hassan Rouhani is nonetheless scheduled to visit Pakistan soon, with indications that negotiations on the pipeline are moving forward. The project is projected to initially bring 750 million cubic feet per day of gas at an estimated cost of $13 per million British Thermal Units..

According to a source from the Ministry of Petroleum and Natural Resources, the Pakistan government is planning to complete the project in two stages. In the first stage, the government will build an LNG terminal at Gwadar Port. This will be followed in the second stage by a pipeline running 700 km from Gwadar to Nawabshah for onward transmission of gas to the northern parts of the country.

“The government of Pakistan is in negotiations with Chinese companies to build a terminal with liquefied natural gas (LNG) handling and re-gasification facilities to develop large storages and lay down the 700-km portion of the pipeline from Gwadar to Nawabshah to ensure the supply of gas in other parts of the country” the source said, adding that, “In this regard, Prime Minister Nawaz Sharif has already signed an agreement during his visit to China.”

Pakistan approached Chinese authorities after its failure to lay a 781 km pipeline from the Iranian border to Nawabshah. “Now we have decided to build the pipeline from Gwadar to Nawabshah in partnership with China,” the ministry official said.

Baloch separatist organizations are also opposed to mega projects of this kind in their province, seeing them as exploitation. However, the surge in attacks by Iranian border guards – and the associated anti-Shia anger – could pose a more immediate threat to the project.

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