Nothing, with the exception of the Kashmir issue, has been more debated, researched and written about in the context of Indo Pak relations than the issue of the Iran-Pakistan-India Natural Gas pipeline in the last decade. From Onshore to Offshore options and international consortia and guarantees to people to contact, almost everything and anything has been tossed around and evaluated, yet to no avail. The pipeline still remains a pipe dream.
The recent thaw in the Indo- Pak relations has once again stirred the hornet's nest. With diplomacy taking the back seat; letting things proceed at their own pace without the ambit of an overall agenda to define and formulate relations; common sense per say seems to be ruling the roost. The cricket tour of Pakistan and the corresponding visa facility to Indian fans has definitely helped push traditional animosities to a new low. With a new bus service now proposed from Srinagar to Muzaffarabad; yes, in the heartland of that perennial bone of contention-Kashmir; the stage is now set for the uppance of this new found bonhomie to the next level, the latest ranting of President Musharraf on Kashmir withstanding.
The current disposition stems from the idea to export diesel to Pakistan .The present demand for diesel in Pakistan is pegged at around 7.5 tonnes/annum that has a refining capacity of about 3 million tonnes. The supply lag in the present scenario is met with imports from Kuwait, to the tune of 4-4.5 tonnes /annum
1 . India, the next door neighbour on the other hand, already has a surplus refining capacity and is exporting diesel to far off countries in Latin America. During the first seven months of 2003-04 itself, India exported 3.2 million tonnes of diesel. Given the geographic location and the economics associated, Diesel imports from India to Pakistan could only be a win-win situation for the two countries. Indian companies like Reliance Petroleum and the state-owned Indian Oil Corporation are well poised to meet this demand and have already envisaged interest for the same.
On the gas front, Pakistan with over 25 Tcf2 of proved reserves and production of .8 Tcf
2 per year is comfortably placed to satiate domestic needs and more in the medium to short term. With potential for further discoveries the country is unlikely to ve any requirements for imported gas in the near foreseeable future, the talk of an Iran Pakistan natural gas pipeline notwithstanding. On the other hand, in India, Natural Gas consumption has witnessed the fastest rate of increase of any fuel in India's primary energy supply constituting as much as 7% with the share expected to double in the next two decades.
Given the scenario, the 2500 km IndoIran Pipeline would only be viable if the feedstock could satiate the power starved northern and western regions of India. In spite of the government of India approving a large number of LNG importing facilities on the west coast and the recent discoveries of Natural Gas in the country by Reliance and Cairns demand for Natural Gas in the country is forecast to rise to 1.3 tcf
3 per year by 2005 and 1.8 tcf per year by 2010.
The security concerns, from India's perspective, have by far dominated the economics for the pipeline. To Pakistan's credit, the country's government has used every possible forum and opportunity to allay Indian fears regarding uninterrupted flow of Gas .Security analysts, on both sides of the border have suggested the International consortia option and even third part system along with multi lateral guarantees to ease Indian strategic concerns given the legacy of relationship the two countries have enjoyed over the last five decades. The offshore option, still through the territorial waters of Pakistan, has also been evaluated but the technology and economics for the same remain questionable. The option of tying the pipeline to the Indus water treaty, the cold war strategy of a zero sum game, only throws up dangerous conjectures and has rightfully been confined to the back burner.
Pakistan's diesel imports in this context present an exciting new opportunity to balance energy concerns on a quid pro basis. Indian imports to Pakistan could initially begin off on train supplies but the eventual agreement must be for a binding annual off take by Pakistan through a pipeline from Jullandhar to Multan or Lahore. With most of Pakistan's existing refining capacity centred on Karachi, the Indian exports could easily meet the demand in Punjab without incurring the costly transportation costs from Karachi. At 4-5 million tonnes annum, which would only go up with time, Indian diesel exports to Pakistan could be constituting as much as half of the country's demand for diesel which could well be supplemented with other products like Furnace Oil . This critical dependence of Pakistan on Indian imports for Petro Products could in turn be used to leverage the gas imports from Iran to India, transit fees for which alone would fetch Pakistan close to $ 500 million /year.
Critics may well point out the non-critical nature of diesel imports vis a vis natural gas in relation to India's energy security. However, the point here is that piped gas from Iran would constitute at the most 10% of projected total gas consumption in India and hence the criticality would be more than offset by LNG imports in the event of a disruption in supplies. LNG imports, given the projected demand, in any case will continue to gain an increasing share of the gas market along with recent domestic discoveries that are expected to go online in the near future.
Piped gas from Iran by most estimates is the cheapest option of gas imports for India. Given the transit fees that Pakistan stands to earn and corresponding dependence on petro products from India renewed efforts are required to revive the peace pipeline that has so far remained a pipe dream. This mutually assured dependence, uninterrupted gas flows in lieu of diesel and other petro products, could well redefine the relationship between the two countries still struggling with the existence of the other.
References: 1 PTI
2 EIA
3 EIA
Rupesh Agarwal Research Fellow ,ORF ,Email ID: [email protected] * Views expressed in this article are those of the author and do not necessarily reflect those of Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
