Wednesday, June 15, 2005

Is there a gas pipeline in Pakistan's energy future?

A tale of three gas pipelines
Zaheer Jan

A pipeline geared to providing natural gas to Pakistan and India couldn’t come at a better time. After the discovery of the giant Bombay High Oilfield in 1974, India has not made any significant discoveries of oil or gas resources. India’s energy needs are increasing in a geometric progression as its economy continues to grow rapidly. Concurrently, Pakistan’s main energy supplier, the Sui Gas field discovered in 1952, is also petering out. According to a report released by the government of Pakistan, Pakistan will face major shortages of oil and gas by the year 2010. Pakistan’s natural gas needs will exceeds available resources by 0.2 bcfd (billion cubic feet per day) by 2010. The shortage will grow to 1.4 bcfd by 2015 and 2.7 bcfd by 2020. Pakistan currently produces 3.5 bcfd of natural gas, enough to meet about half of the country’s total energy needs. If needed supplies were not forthcoming to make up the shortage, the demand-supply imbalance in the energy sector would start biting into the growth rate, according to an Asian Development Bank (ADB) Report.

In India, gas demand is expected to rise from current levels of 1.8 bcfd to 11.5 bcfd by 2010. India’s indigenous natural gas accounts for only 8% of the energy consumption in the country.
With no new major indigenous discoveries on the horizon, both Pakistan and India need to import natural gas. Import of liquefied natural gas (LNG) is one option but it is not as competitive as building a pipeline to bring in gas from the Middle East or Central Asia. Three competing pipeline projects are being offered to fill the subcontinent’s energy needs.
These include, first, a pipeline from Daulatabad field in Turkmenistan through Afghanistan and Pakistan to India (TAPING). Second, a pipeline from Qatar’s North Dome through Oman and Pakistan to India (QOPING). And, third, a pipeline from Iran’s South Pars field through Pakistan to India (IPING).

The 1,056 mile-long TAPING Pipeline is estimated to cost $3.3 billion and will be capable of transporting 2.5 billion bcfd. However, the viability of this project is questionable. While Indian gas companies have shown interest in making investments in TAPING, the ministry of external affairs has expressed doubts about the availability of adequate gas reserves.
Turkmenistan’s domestic demand for natural gas totals 1.45-2.0 bcfd. It exports 1.0-1.3 bcfd to Iran. The remainder is currently contracted to Russia leaving very little for exports. Recoverable reserves of Daulatabad gas field have still to be established. Add to this the difficult construction logistics posed by the need to traverse high mountains; lack of suitable staging stations for supplies to construction spreads; and the volatile security situation in Afghanistan and the project becomes speculative.

The QOPING pipeline would tie Qatar into the United Arab Emirates (UAE)’s Dolphin Project, an integrated natural gas pipeline grid for Qatar, UAE, and Oman. From Oman, a 720-mile subsea pipeline connection to this grid will link Oman to Pakistan. The project is estimated to take five years to build at a cost of $3.5 billion. It will be able to provide 1.6 bcfd of natural gas to Pakistan. United Offsets Group (UOG), a UAE state-owned corporation backing the project, signed preliminary memorandums of understanding with Qatar, Oman, and Pakistan. ExxonMobil also signed a preliminary agreement for the natural gas supply from ExxonMobil’s production capacity in the North Field. The total project is expected to cost around $10 billion, including costs associated with the development of more extensive gas distribution networks in the UAE and Oman.

IPING would build a 1,400-mile long pipeline from Iran through Pakistan and onto India. At an estimated cost of $3.7 billion, this project is the most economically viable of the three serious contenders. Iran boasts the world’s second largest gas reserves of 812 trillion cu ft or 15.8% of world’s total available supply. The entire route of IPING pipeline is overland. It would traverse comparatively easier terrain along Iran’s and Pakistan’s Makran Coast, pass in the vicinity of Karachi and continue on eastwards along the Rann of Kutch to terminate at the industrial city of Ahmedabad in India. While sabotage of the pipeline in Balochistan of Pakistan is a natural concern, this can be addressed by focusing on regional economic development. Before commencing work, project sponsors should get the Balochis to buy-into the pipeline through offers of employment, fuel for their settlements in the vicinity of the pipeline route and water. All these items are in short supply along the pipeline route and the Balochis currently depend upon brushwood or animal droppings to meet their fuel needs. If the Balochis buy into the scheme, safety of the project is assured. Financing for the project will not be a problem. Any number of countries and companies will line up to provide the needed funds.

Politically, however, the IPING Pipeline is the most contentious project of the three that are being floated. This is because Iran remains on Washington’s most un-favored nations list. Along with North Korea, it is a member of George Bush’s “Axis of Evil.” Any move that smacks of helping Iran’s economy enters the realm of high politics. This is where India and Pakistan, in pursuit of their own economic interests, need to use their new relationship with Washington to gain an exception.

Being the world’s only superpower, it behooves the U.S. to give the go ahead to the IPING Pipeline project in the interest of promoting regional economic integration between the Middle East and South Asia. Such a gesture would go a long way toward convincing world opinion that the Bush administration is sincere when it says it wants to pursue diplomacy over confrontation during its second term in office.

Zaheer Jan is an independent energy consultant who has served as the Deputy Chief Engineer, Transmission for the Sui Northern Gas Pipeline Company in Pakistan. He has also served as Manager of Pipeline Engineering for the $24.0 billion Alaska Natural Gas Transportation System and Consultant to the State of Alaska.

This article has appeared in Daily Times, Pakistan (www.dailytimes.com.pk)

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