ISLAMABAD, 23 April 2007 — The cost of laying the approximately 1,500-kilometer long Iran-Pakistan-India (IPI) transnational gas pipeline will cost $7.2 billion to $7.4 billion. The plan, which has been dragging on, will be decided shortly when President Pervez Musharraf and Prime Minister Shaukat Aziz meet with Indian Prime Minister Manmohan Singh this week.
Pakistan government has announced that building of IPI pipeline will begin next year. It will be completed “in three to four years.” “If things proceed according to the present plans, the pipeline will start delivering gas in 2012,” a government spokesman said.
The cost of laying the pipeline within Pakistani territory alone is estimated to cost $2.75 billion if a shorter, 750-kilometer route is adopted. The cost can go up to $3 billion if the longer route of 1,050, kilometers is adopted.
The week’s energy highlight is the decision on the tricky pricing formula to buy Iranian gas both by Islamabad and New Delhi. Aziz chaired a meeting of the Economic Committee of the Cabinet (ECC) that approved an escalating formula which translates into $3.67 per mmbtu when Japan Crude Cocktail (JCC) price is $40 per barrel of oil. But this oil rate will not hold in the present international energy scenario. The gas price will rise to $4.3 per mmbtu if oil price rises to$50 per barrel, to $4.93 per mmbtu if it escalates to $ 60 per barrel. It will rise still higher to $ 5.56 per mmbtu if oil price shoots up to $70 per barrel, to $6.56 per mmbtu if it goes up to $80 per barrel, and to $7.06 per mmbtu in case oil goes up to $90 per barrel. The pricing is at Iran-Pakistan border.
In phase-one of IPI, Iran will deliver from its South Pars Gasfield, 2.1 bcfd (billion cubic feet daily) at the Pakistani border. The quantity will be equally shared by Pakistan and India.
In phase-two, another 3.2 bcfd of gas will be delivered by Iran, taking the total delivery to 5.3 bcfd. Of this, Pakistan will receive 2.1 bcfd and India 3.2 bcfd.
The three countries have almost finalized all the technical details of the pipeline. They have overcome, too, the tricky question of pricing. But US sanctions on Iran against its nuclear program seemed to block the plan.
The US reaction over the IPI decision in Islamabad was swift. State Department spokesman Sean McCormack said, “we’ve made our views clear on IPI.
Washington opposed IPI project, saying that it violates a 1996 law that requires the US President to impose sanctions on any international firm that invests $40 million or more in oil or gas projects in Iran.
But Musharraf and Singh are going ahead with IPI despite possible US threat of sanctions, as they are compelled by their energy needs.
Dr. Jawad Aryan Manish, leader of the visiting Iranian parliamentary delegation said, “there is no hurdle in laying the gas pipeline between Iran and Pakistan.”
“The work on the project will start soon,” Manish said.
The questions relating to transit or transportation fees are yet to be taken up.
