The Express Tribune
Published Date: Oct 25, 2013
SDPI advises govt to nix Iran gas project
natural gas by pipeline from Iran will be an economic ‘death sentence’
for the country, the Associated Press and Kyodo reported on Thursday.
Citing a report released by the Islamabad-based Sustainable
Development Policy Institute (SDPI) on Wednesday, the reports state that
under the deal struck with Iran, the gas sold to Pakistan would likely
be several times more expensive than domestic gas.
SDPI experts recommended the government renegotiate the natural gas
import price with Iran under the Iran-Pakistan gas pipeline project due
for commissioning by the end of next year.
"It is imperative for Pakistan to renegotiate the import price of
natural gas at earliest,” Arshad Abbasi, who heads the energy team at
The gas purchase agreement links the gas price from Iran to the ‘Japan Crude Cocktail’ which is determined by the price of crude oil
when cleared by Japan Customs.
But Abbasi said that formula does not take into consideration the global trend of delinking gas prices from oil prices.
"In Asia, Japan has already asked Qatar to consider a pricing
mechanism different from oil-linked contracts,” Abbasi said. “The energy
landscape has transformed and gas prices have fallen during 2007 to
2011 in all gas hubs. In the current scenario, the liquefied natural gas
import price after incurring the shipping and re-gasification cost for
2012 show that the price of the pipeline’s gas might be even costlier
than LNG import prices," Abbasi said.
SDPI President Shafqat Kakakhel said the report’s purpose was not to
find fault with those who negotiated the gas prices, but he added the
skills of the Pakistani negotiators “were not up to the mark.”
A member of the study team said that by linking the gas price with
the Japan Crude Cocktail, the Pakistani negotiators had inflated prices
by $2 per barrel. He said the price should have been linked to the
import price of crude oil at the factory gate in Pakistan.