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Pakistan & New Energy Projects

Updated on December 24, 2016

Energy is the lifeblood of modern economies and the engine of all machines. It is a source of enormous profit and political might. The major powers have gone to great lengths over the past century to secure access to it and influence the terms of its trade. Energy resources can act as important instruments for expediting the process of economic development and contribute to realising the objective of economic cooperation and integration. In this context, it can be fairly assumed that demand for energy and access to the areas that still have large untapped resources of oil and gas will be at the centre of global affairs for several coming decades.

Pakistan is where the energy deficit mega-economies of Asia meet with the energy surplus countries of Central and West Asia. The competitions for oil and gas is heating up in Pakistan’s neighborhood. According to a report published in The News on 13 February 2005, Pakistan itself would be facing a shortfall of 350-mmcfd from the year 2010 going up to 1,691-mmcfd in 2015 and 3,156-mmcfd in 2020. The demand for gas is increasing by 7 to 8 per cent per annum and , therefore, need to find alternative sources for it is quite understandable. While Pakistan does not have energy resources of its own to meet the growing demands in future, there is pressing requirement to find alternatives energy resources. Pakistan has geography working in its favour. Not only it can meet its future demands , it can supply to the large energy deficit countries of the continent. It could become the energy hub for the flow of natural gas energy deficit booming economies.

Several years after India and Pakistan began exploring the import of natural gas through trans-national pipelines, the projects remain a pipe dream. There are plenty of prospective sellers: Iran, the United Arab Emirates, Qatar and the Central Asian states. India and Iran signed a memorandum of understanding in 1993. But the tense relationship between India and Pakistan blocked completion of a feasibility study for an overland pipeline. In 1995, Pakistan and Iran signed a preliminary agreement for construction of a natural gas pipeline linking the Iranian South Pars natural gas field in the Persian Gulf with Karachi, Pakistan’s main industrial port located at the Arabian Sea. Iran later proposed an extension of the pipeline from Pakistan into India. Not only would Pakistan benefit from Iranian natural gas exports, but also Pakistani territory would be used as a transit route to export natural gas to India and, if required, to others. Another competing pipeline is Turkmenistan-Afghanistan-Pakistan , which can possibly be extended to India and other countries. So far number of MoUs have been signed and several meetings between officials of the three countries have taken place but nothing concrete has been decided . There are few serious reservations and snags which are required to be addressed. However, upon realization, these projects hold immense prospects for regional cooperation and economic growth. This is the background where a customer-consumer relationship can be conceived, evolved and strengthened for enhanced regional and trans-regional economic cooperation and corporate security.

Energy is essential to life. Over millennia, humans have found ways to extend and expand their energy harvest, first by harnessing draft animals and later by inventing machines to tap the power of wind and water. Industrialization, the watershed social and economic development of the modern world, was enabled by the widespread and intensive use of fossil fuels. This development freed human society from the limitations of natural energy flows by unlocking the Earth's vast stores of coal, oil, and natural gas. Tapping these ancient, concentrated deposits enormously multiplied the rate at which energy could be poured into the human economy. The result was one of the most profound social transformations in history. The energy transformations experienced by traditional societies-from human labor alone to animal muscle power and later windmills and watermills were very slow, and their consequences were equally slow to take effect. In contrast, industrialization and its associated socio-economic changes took place in the space of a few generations.

Iran - Pakistan - India Pipeline Project (IPI). Iran has proposed the export of natural gas from Iran to India since 1993. Alongside this proposal was the plan to export natural gas to Pakistan as well. The Iranian government proposed the construction of a pipeline from its South Pars fields in the Persian Gulf to Pakistan's major cities of Karachi and Multan and then further onto Delhi, India. In 1995, Pakistan and Iran "signed a preliminary agreement for construction of a $3 billion, 870 mile onshore gas export pipeline linking South Pars with Karachi, Pakistan. This pipeline did not include the additional city of Multan, Pakistan and excluded the transport of gas on into India. In April 1999, the Iranian and Indian governments established a bi-lateral task force of business and government officials to look at the economic and industrial feasibility of developing the pipeline. At the end of 1999, Chief Executive Pervez Musharraf of Pakistan visited Tehran to discuss bilateral relations as well as the pipeline project. The months following Musharraf's visit to Iran were characterized by more diplomatic visits in the region. In March 2000, the Pakistani Secretary of Petroleum visited Iran to formally agree to the pipeline project between the three countries. Iranian government officials visited Islamabad later in April 2000 for the Pakistani government to sign the contract. In 2002 the Iranian President during his visit to Pakistan formally discussed the possibility of the IPI project. However, this project ran into many snags mainly due strained relations between India and Pakistan , India’s concerns over routes and security of the pipeline. The project has gained momentum during current thaw, despite USA’s pressures on India and Pakistan for not constructing project because of sanctions on Iran and also due to USA concerns over Iranian nuclear programme. Earlier in December 2005 , Iran and Pakistan held bilateral talks to take forward the discussions on the legal, technical and financial aspects of the ambitious project prior to the drafting of the project structure and framework agreement. According to the roadmap finalised during bilateral talks between India-Pakistan, India-Iran and Iran-Pakistan, the three countries are ready to merge the talks to trilateral level with official level meeting in March 2017 to be hosted by Tehran. During the ministerial trilateral meeting in Tehran, the the project implementation agreement is likely to be signed. The structure of the project, the framework agreement, the responsibility of each government and the price formula will all be agreed on. The estimated $7.2 billion pipeline is to run about 1115 km in Iran, 705 km in Pakistan and 850 km in India. India is looking at the pipeline project to secure 60-90 million standard cubic metres per day (MSCMD) of gas supplies, while Pakistan is seeking 30-50 MSCMD to bridge the expected shortfall in domestic production. The gas sale and purchase agreement is to be worked out for 25-30 years.

Its time for Pakistan to value the national interest in the regional perspective for long term cooperation and economic growth. The pipeline projects have great potentials to create an environment of mutual interests , promote strategic collaborations and regional harmony. Pakistan, due to its unique geographical location is in a position of advantage to play a greater role in establishing a link between West, Central and East Asia. The opportunities are always few and we must not lose the one afforded to us. There is need to show sense of urgency in the long-term strategic interests for sustainable growth and economy. Pakistan’s destiny lies in its timely and pragmatic decisions, which surely is the concern of policy makers. The future is ours provided we show vision and farsightedness to identify the objectives and relentlessly pursue the policy goals.

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    • Suhail and my dog profile image

      Suhail Zubaid aka Clark Kent 

      21 months ago from Mississauga, ON

      Ali,

      I just wanted to point out that it is well understood that all projects being completed in Iran are complementary to CPEC and Iran-Pakistan gas pipeline.

    • AshutoshJoshi06 profile image

      Ashutosh Joshi 

      21 months ago from New Delhi, India

      India & Pakistan could have have benifitted a lot had they shared friendly relation. In all likelihood especially considering the recent developements and an ever so strained relation, India most likey would opt out of IPI project and rather continue to explore the undersea pipeline connecting Chabahar port to Gujarat. Already investing in Iran and Afghanistan to further penetrate into central Asia. Now the cost($4.5 Billion) and the expertise required for the undersea pipeline are a concern here. Simultaneously, India is also studying a possible pipline from Serbia at a whopping $25 Billion cost with Russia. Its easier said then done, lets see how it ultimately unfolds.

    • Suhail and my dog profile image

      Suhail Zubaid aka Clark Kent 

      21 months ago from Mississauga, ON

      I liked this informative article on my country of origin - Pakistan. Very nicely written.

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