Published Date: Oct 24, 2013
IP pipeline: SDPI report suggests renegotiating gas price
Sustainable Development Policy Institute (SDPI) in its report launched
on Wednesday has termed the Iran-Pakistan gas pipeline project
financially unviable for the country, taking the plea that the price
agreed in the agreement is far high as compared to Iran’s other gas sale
agreements made with some other countries.
The report, which is an
independent project of SDPI, has suggested that Pakistan should try to
re-negotiate on the price of gas. The aforementioned report has
discussed in detail the Pakistan’s natural gas sector, performance of
gas-fired thermal power plants and the Iran-Pakistan pipeline project.
research report, while not negating the importance of IP gas pipeline,
has revealed that Iran had made gas sale contract with China at much
lower price but on the other side it is almost 3 times what is decided
with Pakistan so it was needed to renegotiate the price.
the report, Engr Arshad H Abbasi, Energy Advisor SDPI, while speaking at
the occasion told that the price was set following the formula in which
gas and oil are linked with each other. He gave the example of Italy
and Germany that took their cases to the International Court of
Arbitration for delinking of the oil and gas pricing regarding their gas
deals and also won the case from the court.
He clarified that there
was no point for cancellation of the Iran-Pakistan gas pipeline
agreement but renegotiation of the gas prices under the prevalent
situation was needed under the clause 6.3.2 provided in the agreement.
He further said that SDPI has analysed that power sector of Pakistan and
in-depth studies reveal that buying gas from Iran at much higher rate
cannot be declared feasible to be used for electricity generation as it
will increase the cost instead of providing relief.
his argument Arshad Abbasi said according to the agreement rate for
Pakistan is more than $15/MMBTU if calculated in relation to the current
JCC prices though Iran is supplying gas to Turkmenistan at a rate of
$4/MMBTU. SDPI report made with his contribution also suggests that
Pakistan also needs to follow global shale gas initiatives to decrease
its reliance on the foreign resources.
While chairing the session,
Engr Shamsul Mulk, former chairman WAPDA/Former Chief Minister KPK, drew
attention towards the consistent policy failures in the energy sector,
which have led to the present high costs of electricity.
asserted that as the cost of electricity generation from oil or coal
sources is much higher, natural gas is crucial for Pakistan’s energy
sector. In this scenario, Pakistan needs to import gas but the
importance of mutual benefits regarding the IP project cannot be ignored
and Pakistan should not compromise on pricing issues.
the need for building more dams and water reservoirs. Quoting the
example, Shamsul Mulk said Egypt managed to survive 7 year long drought
with the help of proper water storage system of storage over Aswan.
Ambassador Shafqat Kakakhel, Chairman Board of Governors SDPI said that
the report has been launched with the aim to contribute to the ongoing
national dialogue over energy security of Pakistan. There is a dire need
of improving transmission and distribution system, developing clean
sources of energy, controlling indiscriminate spread of gas connection
and maintaining smart meters, he maintained.
He said Pakistan has
already witnessed capital flight due to energy crisis Pakistan as a lot
of textile units had already shifted to Bangladesh that has also caused
massive un-employment in the country.
Earlier, in his welcome
remarks, Dr Abid Qaiyum Suleri, Executive Director, SDPI highlighted
that SDPI’s report on IP project presents an objective analysis of
Pakistan’s energy scenario while taking into consideration the financial
and economic ramifications of the project. He also emphasized the
significance of this report and the IP project in the context of
US-Pakistan relations as it is believed that Pakistan’s Prime Minister
will have discussion about the country’s energy crisis with his US
counterpart in Washington. Dr Suleri said that the report gains
significance also from the fact that Pakistan will have to consider the
international natural gas scenario and the position taken by United
States given its diplomatic relations with Iran.