IPI deal to be finalised in a month

[Naveed Yaseen]

ZAFAR BHUTTA
ISLAMABAD (May 26 2009): Following settlement of gas price issue at 80 percent of crude, Pakistan and Iran are expected to finalise the deal on Iran-Pakistan-India (IPI) gas pipeline project in Turkey within a month.

Petroleum Ministry will seek the formal approval from the Economic Co-ordination Committee (ECC) of the Cabinet in its upcoming meeting to ink final deal on IPI with Iran. Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain revealed to the Business Recorder on Monday that final agreement on the gas sales purchase agreement (GSPA), finalised on Sunday in Tehran, would be singed in the next two to four months in Turkey - an agreement that will be supervised by foreign country laws.

He also confirmed the import of gas from Iran at the Iranian offered price of 80 percent of crude oil. "Pakistan has made a commitment with Iran to import minimum 750 million cubic feet gas per day and maximum one billion cubic feet gas per day," Dr Asim said.

Some 1,100 of the 2,100-kilometre pipeline would be laid in Iranian territory and 1,000 kilometres in Pakistan. According to the initial design of the project, 2,700 kilometre-long pipeline was proposed to cover around 1,100 kilometres in Iran, 1000 kilometers in Pakistan and around 600 kilometres in India at a pipe diameter of 56 inches.

Iran has specified the diameter to secure the possibility for India to join the project, but Pakistan has come to the conclusion that India is not interested in the gas deal and, therefore, the size of the pipeline may be reduced to 42 inches.

The Petroleum Advisor said that Pakistan and Iran had agreed on the size of pipeline to 42 inches in diameter. After the reduction in size, Pakistan's cost of pipeline had been reduced from two billion dollars to 1.2 billion dollars, the Petroleum Advisor said.

According to official sources, after the reduced size of pipeline, India is effectively out of the project and technically it would not be possible for Iran to transmit the gas through pipeline to India if it decides to join later.

Pakistan and Iran finalised the GSPA in December 2007 and the final agreements were planned to be singed in February 2008, but when Iran reopened some issues of the GSPA, the signing of the agreement was delayed. In January 2008, Pakistan and Iran agreed on a gas price formula at 45 percent of crude oil in global market.

However, during the meeting in September 2008, Iran offered gas price of 85 percent of crude oil and Pakistan and Iran again held talks in the end of December 2008 in Tehran. Pakistan offered 60 percent of crude oil price and revised it later to 70 percent of crude oil and Iran scaled down its offered price to first 78, but its parliament rejected that offer and revised it to 80 percent of crude oil.

According to an analysis, the imported Iranian gas will result in annual savings of one billion dollars due to reduced import of furnace oil, (at crude oil price of 50 dollars per barrel). Similarly, there will be an annual saving of 735 million dollars if equivalent quantity of LNG is imported. The savings will increase in line with the hike in global crude oil price.

http://www.brecorder.com/index.php?id=1849