The Gas Pipe Dreams Forging Reality?

Columnist Muhammad Irshad looks at the economic (and political) benefits of the proposed Trans-Pakistan gas pipeline.

The historic and geographic reality of Pakistan’s location next to India was always a source of trouble for Pakistan, but for a change, the same location is likely to be beneficial for Pakistan. Gas hungry India badly needs gas and the possible suppliers Iran and Turkmenistan are very anxious to supply the same. In both the cases, land based gas pipes must pass through Pakistan. Thus in terms of availability of gas in abundance and also the transit fees, Pakistan stands to gain a lot. The idea has been in circulation since decades, but the recent visit of the Iranian president to Pakistan, and Pakistani Prime Minister Jamali’s visit to Turkmenistan, are all indicators that the pipe dreams might be very close to reality.
India’s burgeoning industry is desperately looking for natural gas, the cleanest and cheapest fuel. India desperately needs large supplies of natural gas amid dwindling domestic supplies, but its search for new markets from which to import the product continues to be met with disappointment. India’s existing demand of 151 mm cmpd (million metric standard cubic metres) is likely to shoot up to 391 mm by 2025. The present domestic gas supply is 65 mm, according to government statistics. With the impending possibility of Indian economy growing at least 6% to 8% annually, if not more in the next few years, the energy needs of the country are sure to enhance substantially. Gas is a veritable source of energy that can serve this growth demand. After many negotiations and conducting studies, the Indian government has zoomed into two possible suppliers — Turkmenistan and Iran, both of which are very keen to go ahead with the supplies. But since last about a decade, the projects were being delayed for one reason or the other.
The ex-Russian state and now the Muslim country of Turkmenistan has abundance of gas and natural resources but it is land locked, with the available gas export to Russia only, they are being paid very less (the country generally asks for $US40-$42 per 1,000 cubic metres of its gas, and prevailing world prices are higher. Electricity generation companies in Pakistan are paying $US 85) and also half of the amount has to be through a barter system, thus an export possibility towards Pakistan could give tremendous economic boost for that country, and Turkmenistan would be glad to make Pakistan as a sale point of its surplus gas. The country could ship about 15 billion cubic metres of natural gas annually, which could later be increased to 30 billion cubic metres.
On May 30th 2002 President Hamid Karzai, then chairman of Afghanistan’s interim administration, Pakistan’s President General Pervez Musharraf, and Saparmurat Niyazov, the President of Turkmenistan, signed a Memorandum of Understanding, about laying a pipeline that would carry 23bn cubic metres of gas a year through a 1.2 metre thick, 1,400 kilometre long pipeline snaking across southern Afghanistan, from Turkmenistan’s Daulatabad gas fields to the Pakistani port city of Mutan through either Peshawar or Gwadar. This resuscitates a project that has been dormant since the late 1990s. Two weeks earlier, World Bank President James Wolfensohn told reporters in Kabul that the international lending institution might be interested in such a project.”We are not taking the entrepreneurial role, but were in it to come up and we would certainly take a look at it. There are a number of entrepreneurs already in the exercise, so we will wait and see,” he said. Western governments are also taking a keen interest. “The pipeline is one of those things out there in the future,” a United States State Department official told the Far Eastern Economic Review estimating that Afghanistan could earn $100 million-$150 million a year in transit fees.
In the mid-90s, in its previous incarnation, the proposed pipeline had successfully lined up a group of investors known as the CentGas Consortium. The US company Unocal after usurping the lead position from Argentina’s Bridas Corporation took the largest share — the six other partners, including Saudi Arabia’s Delta Oil Company, Itochu Oil (Japan), Crescent Pakistan, Gazprom (Russia), Hyundai (Korea), Indonesia Petroleum and Turkmenistan, coupled with Afghanistan as a benefactor of transit fees. However, in August 1998, terrorists linked to Osama bin Laden bombed two US embassies in East Africa. After a few cruise missiles were fired into Afghanistan in retaliation, Unocal abandoned the pipeline plans. Pakistan’s Prime Minister Jamali’s recent visit to Turkmenistan is likely to infuse a new life in the project.
Americans are very keen in pursuing this $ 3.2 billion Turkmenistan-Afghanistan-Pakistan gas pipe line project. Their enthusiasm is manifest because the project is likely to give lion’s share of construction and supply to the US multinational companies, and thus a big boost to the American economy, apart from giving them an upper hand in the supply and control of gas supply in the region. A greater American push would also demoralize the proposed Iran-Pakistan-India gas pipe, where influence and revenues to Iran are considered against American interests.
The other gas supplier to India could be Iran. The President of Iran recently visited Pakistan, and on his agenda an important item was to push the proposed $ 2.8 billion proposed Iran-Pakistan-India pipeline. Iran has around 812 trillion cubic feet of proven natural gas reserves which is 17 to 18% of global gas reserves.
The buyer is gas hungry and the possible suppliers are anxious to give the supplies, the only problem is that in both the cases the overland gas pipe has to pass through Pakistan. Initially the Indian reaction was a loud “NO” to the project. The Indian Foreign Office had said that India was not interested in importing gas that had to pass over Pakistani territory. Nuclear rivals India and Pakistan, who have gone to war three times over Kashmir, are considered unlikely to reach agreement on transit for Gulf and Central Asian gas through Pakistani territory. Indian External Affairs Minister Jaswant Singh last year visited Tehran and discussed with the Iranian leadership long-term co-operation in the energy sector. “There was no way India could agree to an overland pipeline, unless some fundamentals were addressed,” he was quoted as saying. There appeared no way that India was going to allow itself to become dependent upon an energy source that runs through the territory of its mortal enemy. The decades-old pipeline idea, from gas-rich Iran east through Pakistan and into gas-hungry India, has always floundered on India’s reluctance to deal with Pakistan.
The other possibility for India to meet her energy requirements was to have gas by building an underwater pipe from Iran round to India. But the comparisons about building either an overland (~$3 billion) or deep underwater (~$30 billion) pipeline from the Persian Gulf to Bombay were simply disappointing. “A sea route, skirting Pakistan, suits India but it is very expensive and the amortisation period may run into hundreds of years,” said Anjan Roy, an economist. The sea route costs are so prohibitive that Iran has almost refused to proceed on this topic, and the economics of the project for the Indians is also prohibitive. So the difficult choice for the Indians is going to be to either forget about their industrialization with excessive gas availability or trust the guarantees by Pakistan. Many Indians would not like to trust the guarantees provided by Pakistan but every Indian would like to have Iran to enter into multi-billion dollar contracts with Pakistan. Tehran is equally adamant not to give up its gas pipe project for fear of losing out to other western supported gas pipeline project for the region. The US has a strategic interest in keeping Iran from expanding its strategic and economic interests in the region, which is why Washington has been opposing the proposed pipe line. Washington is also wary of the growing relationship between Tehran and Islamabad ever since the only major irritant between the two sides —Pakistan’s support to Taliban — has been rendered irrelevant by the recent events,” the sources added.
Both the gas pipe projects are in the interest of Pakistan’s economy and political influence. Both the pipes would ensure a win-win type of relationship with India, the easing of which may bring prosperity to the region, and may ultimately end in terminating the miseries of Kashmiris. Both the pipelines will strengthen the bond of Pakistan’s relations with the Muslim states of Iran and Turkmenistan. Whereas American are welcome to pursue their interests, it is heartening to note that government of Pakistan has replied, keeping in view their interests and their benefits.