Published Date: Oct 23, 2013
Report: Iran gas imports a disaster for Pakistan
Pakistan’s plan to import natural
gas by pipeline from neighboring Iran would be an economic “death
sentence” for the country because the gas price is too high, a Pakistani
advocacy group said in a report released Wednesday.
Despite U.S. pressure, the Pakistani
government struck a deal with Iran to import gas in the hope of relieving the
country’s energy crisis, especially the shortage of electricity. Gas is used to
fire many of Pakistan’s power plants, but insufficient quantities mean rolling
blackouts are common.
The Islamabad-based Sustainable
Development Policy Institute said in its report that the contract with Iran
means the gas sold to Pakistan likely will be several times more expensive than
the domestic gas currently used.
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“This is a death sentence for
Pakistan’s economy,” the report said. It criticized Pakistani officials
who “blatantly ignored the energy dynamics and its pricing while going for
An official at the Ministry of
Petroleum and Natural Resources rejected the report, saying the pipeline
project was good for Pakistan. He spoke on condition of anonymity because he
was not authorized to talk to journalists.
The advocacy group’s findings
represent the latest challenge to the plan. There are also serious doubts about
how Pakistan could finance the at least $1.5 billion needed to construct the
pipeline and whether it could go through with the project without facing U.S.
sanctions in place over Iran’s nuclear program.
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“This gas will be an economic
disaster for us,” said the lead author of the report, Arshad Abbasi, at
its release in Islamabad.
The chief guest was Shamsul Mulk, an
ex-chairman of Pakistan’s water and power authority and former head of the
advocacy group’s board of governors. Many other former senior officials and
academics are affiliated with the institute.
The report called on the Pakistani
government to renegotiate its contract with Iran and uncouple the price of gas
with the cost of oil. That could produce lower gas prices that are closer to
Pakistan’s domestic cost of gas.
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The agreement with Iran stipulates
that Pakistan must construct its side of the pipeline by December 2014. If the
country fails to meet this deadline, it will be liable to pay fines that could
run into the millions of dollars per day.
The Iranian government says it has
built 900 kilometers (560 miles) of the pipeline on its side of the border,
with about 320 kilometers (200 miles) remaining to be built inside Iran. The Pakistan
segment of the pipeline is expected to be about 780 kilometers (500 miles) and
has not yet been constructed.
The U.S. has opposed the project,
instead promoting an alternative pipeline that runs from the gas fields of
Turkmenistan to Afghanistan, Pakistan and then to India. The U.S. also has
championed a number of electricity generation projects within Pakistan, such as
helping renovate hydropower dams.
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The advocacy group also championed
the use of hydropower, which is much cheaper than gas but can require
significant up-front costs.