Baku, Azerbaijan, April 15
By Umid Niayesh - Trend:
The fate of Iran-Pakistan gas pipeline is unclear after two-decade long negotiations, while it should have been implemented a long time ago.
Pakistani Tribune Daily Press reported on April 13 that the emerging geopolitical situation following the tensions between Saudi Arabia and Iran over the Syrian conflict and other Gulf issues have overshadowed the most feasible gas import project - Iran-Pakistan (IP) gas pipeline.
Before that, Indian Hindu Daily newspaper reported in November 2013 that New Delhi is negotiating with Islamabad to export LNG, but there are differences in prices.
Some reports also have been published about the possibility of transferring East Asian gas to Pakistan through India in the last several months.
Pakistani Prime Minister Nawaz Sharif will pay an official visit to Iran in May or June, and the IP pipeline is expected to be discussed.
Hooman Peimani Research Fellow at the Asia Pacific Energy Research Centre (APERC) told Trend on April 15 that the main barrier to the realization of the IP pipeline (also known as Peace Pipeline) project is the existing sanctions on Iran, not the existence of alternative gas suppliers to Pakistan.
Commenting on reports about exporting East Asian or Southeast Asian gas to Pakistan via India and by reversing the gas direction of the IP, Peimani said that "such route reversal (from the existing east to west) is not a real option for Pakistan".
"The reversal of the Peace Pipeline is at best an idea, which has no ground for its realization. Among other factors, India and Pakistan must settle their security concerns about each other before any type of oil or gas agreement, which does not seem to be likely in the foreseeable future," he added.
Iran and Pakistan sealed a contract in March to export 21.5 million cubic meters of Iranian gas to Pakistan, through 1,600 km-long pipeline.
Iran's offered $500 million credit, equals the one third of the total costs of Pakistani sector pipeline, but project hasn't started yet despite this. At the same time, Iran has completed about 900 km (or 75 percent) of the PI pipeline on his territory. According to the contract, Iranian gas was planned to be delivered to Pakistan during 2014.
Peimani said that "East Asia is a major gas importer, not an exporter, and the Southeast Asian (SEA) major gas exporters have more lucrative markets than Pakistan, while they are too far from that country to seriously consider exporting gas to it by a pipeline".
"Theoretically, Myanmar is the only potential SEA gas exporter to Pakistan provided it develops its gas reserves far beyond its existing operating units, as most of its current production is mainly exported to China and consumed by Myanmar itself," the expert explained.
"Iran has already finished a major part of its section of the pipeline, and will finish it completely when Pakistan starts working on its section. Iran has also offered financial and technical support to Pakistan for construction of its part of the pipeline. Given these realities, if Pakistan gives up on this project to import gas from Myanmar - a relatively small gas exporter - instead of Iran, which has the world' s largest conventional gas reserves, it would defy logic," he said.
Iran's gas export capabilities
Iran's daily gross gas output stands at 575 million cubic meters (mcm), roughly equals to domestic consumption, but five phases of the country's giant South Pars gas field wouldn't implemented until 2017.
The total gas production of phases 12, 15, 16, 17 and 18 at South Pars will be 182 mcm per day.
Iran exports 25 million cm per day of gas to Turkey, while it has gas contracts with Iraq and Oman to export 75 mcm of gas to these countries until 2017.
Iran had faced with serious gas shortage last winter and had to decrease gas supply to power plants, gas re-injection to old oil fields which are in their second half-life and as well as gas delivering to petrochemical units.
Peimani said that "Iran requires extensive investment in its oil and gas industries, which have suffered from low investment for years especially since the imposition of the international sanctions".
"Hence, in absence of foreign investments, it will take years for Iran to maximize its gas and oil production on its own," he added.
Responding to Trend's question whether Iran's supplying for its internal gas needs - especially gas re-injection to the oil fields which are in their second half-life to prevent their more decline in oil production - is more beneficial or its gas exports to Iraq and Oman, Peimani said that the issue here is different.
"It's about not loosing the real opportunity to increase Iran's exports of both oil and gas whenever possible, to increase Iran's global market share. Of course, re-injecting gas to those oil fields to ensure their operation and longevity is a necessity," he said.
The expert went on to add that other major gas exporters in the Persian Gulf must be taken into account.
"Iran's failure to export gas to Iraq for its domestic consumption and Oman to be likely used partly for its domestic consumption and partly to feed its LNG plants, will deprive Iran of two lucrative regional markets when the European market is still closed to Iran," Peimani explained.
Iran sits on the world's largest natural gas reserves. The country's estimated reserves are around 33.6 trillion cubic meters.
Opinions expressed by Dr. Peimani are his only.