Iran Pakistan Gas Pipe Line

Pros And Cons With Reference to

Current Energy Crises And Regional
Security Issues
Contents
• Introduction to IP Gas Pipeline
• History of Project
• Project Profile
• Project Route Map And Configuration
• IP Project as Solution to Energy Crisis.
• Risk Analysis of Project
• US Sanctions & Applicability to IP Project
• Geo Politics of Gas Pipe Lines
• Recent Progress
• Recommendations
AIM
• To familiarize the participants
about Pakistan Iran Gas pipe
line and its pros and cons.
Introduction
• PIP gas pipe line also known as peace
pipeline

• Length 1880 kilometers, Pakistan side 780

Km.

• 21.5 million cubic meters per day

• The project will support around 4,000 MW

power generation capacity.
Introduction

• Iran announced that it has completed

construction of its section

• Pakistan will have to pay a daily penalty

of $1 million
History Of The Project
• Idea was first conceived by young Pakistani
Engineer Malik Aftab Khan in 1950 in an
article published by the Military College of
Engineering, Risalpur with title “Persian
Pipeline” .
• Idea was finalized in 1989 and Iranian
Government responded positively.
• Initial cost of construction was estimated at
US$ 7.5 billion and an agreement signed in
1995 to construct pipeline from South Pars
Gas field in Iran to Karachi
History Of The Project
• No progress till 2004 and project revived
after UNDP report which referred project
as peace and prosperity Gas pipeline

• In February 2007, India and Pak

agreed to pay Iran US 4.93 Dollar per
Million British Thermal unit.

• In 2009 India withdrew from project

over pricing and security issue after
signing nuclear deal with US
History Of The Project
• On 30th January 2013, Pak approved deal
with Iran for laying Pakistani segment of
pipeline and on 11th March 2013 project
was inaugurated by President Asif Ali
Zardari
• PM Nawaz Sharif Assured commitment to
project in recent 68th Annual UN General
Assembly Session
Project Profile
• Length. Total length is 2775 Km. 1172 km of
length is in Iran and remaining in Pakistan.
• Route. Starts from Asalouyeh, Bandar-e- Abbas,
( Iran) to khuzdar, sui and Multan ( Pakistan).
• Diameter 56 inch (1,422 mm)
• Capacity. Initial capacity would be 8.7 billion cubic
meter which will be raised to 40 billion cubic
meter.
• Cost. Expected cost to incur on completion would
be around 8 billion US Dollar.
Route and Configurations
 Route And Configuration
• Source Reserves: South Pars in Iran

• Distance upto Iran-Pak Border: 1,150 km

• Pakistan Segment Distance: 781 km

• Gas Volume: 750 MMcfd

• Optimum Pipeline Configuration:

(Pakistan Segment) 42” inch
IS It Feasible
• A land-based pipeline would be four times cheaper
than any other option.
• IP is a direct from Iran as opposed to TAPI has
Afghanistan in between.
• The Government of Pakistan has determined that the
natural gas from Iran would provide the cheapest fuel
for power generation
– TAPI is $13 per million BTU
– IP is $ 11 per million BTU (in 2007 it was offered at
$ 6)
– LNG from Qatar would cost $ 18 per million BTU
• If China joins the project Pakistan stands to Receive $
500 million in annual transit fees
Dr. Kanwal
IP Project as Solution to
Energy Crisis.
Energy Crises
• Rapidly growing population resulting in
increasing energy demand

• Largest energy source in the country,

supplying 49% of the entire energy needs

• Excessive agricultural, industrial and

domestic use in the country
Energy Crises
• In Pakistan 50 % of generation is on Gas and
30% on oil and non availability of gas is
directly impacted on electricity generation.

• Only 21% population has an access to natural

gas and with rapid urbanization, the demand is
growing

• The supply and demand gap is around 1.2

Bcfd which raised to 3.1 Bcfd by the year 2015
and ultimately to 11.1 Bcfd by the year 2025
Solution To Energy Crises
• Impact of Energy Crisis has been visible
in Pakistan as it has been battering all
sectors in including domestic industrial,
agriculture and commercial sectors.
• Official statistic suggest that more than
400000 have lost job and annual loss is
estimated to be around 240 Billion Pak
Rupees.
Energy Crises
• Supply and Demand Gap in Pakistan is
described in following diagram
Energy Crises
• Most of our IPPs ( Independent Power
Producer) are on furnace oil and cost of
furnace oil is increasing sharply thus
driving up the cost of power generation.

• Cost of furnace oil increased in real terms

from $ 236 per ton to $ 639 per ton.
Energy Crises
• Power Generation Mix In Pakistan
Energy Crises
• The sharp increase in the cost of furnace
oil coupled with the increase in the share
of oil based generation is causing
abnormal increases in the cost of power
generation

• Pakistan after completion of project will

import around 750 mcft of natural gas
daily for generation of approximately 4000
MW of electricity.
•
Solution To Energy Crises
• Replacement of imported furnace oil by
Iranian gas in our industries will result in
estimated saving of billions of rupees.

• The pipeline will generate employment

opportunities in Baluchistan and will also
result in economic prosperity of Pakistan.
Muhammad Shreef
Cost Benefit Analysis
Cost Benefit Analysis
• It is expected to cost US$7.5 billion

• The pipeline will carry only 8.7 billion cubic

meters of gas per year and 40 billion cubic
meters as a maximum capacity

• Already the delay in the construction has

caused much damage to Pakistan and now the
gas will cost Pakistan $6 per million BTU more
as compared to 2007.
Cost Benefit Analysis
• Prospects
– A win-win situation for pakistan and Iran
– Addition of 5000 Mw to National Grid
– Savings on Import of Expensive curde oil/LNG
– Creating Partnership/Latent Interdependence
and harmonizing conflicting strategic vision
– Creating job opportunities in balochistan and
sind
– Prosperity in pakistan by generating economic
activity
Cost Benefit Analysis
– Fulfilling Pakistan’s longstanding dream of
energy transit country
– Prospects of indai and even china joining ipgp
– Gawader becoming hub of trade activity.

• Challenges/Cautions

– IPGP may trigger us sanctions; caution needed

– Increasing overdependence on foreign fuel;
attention to own resources emphasized
– Ignoring indigenous hydroelectric potential
and thar coal
Cost Benefit Analysis
• Further alienation of baloch peoples, if not
include in the project

• Real benefit only if India/china join IPGP

• Penalty/force majeure

• With expansion of shale gas, the price may

become untenable
Cost Benefit Analysis
Cost Benefit Analysis
• Pakistan will get a royalty of more than $ 4
billion for the pipeline.

• Pakistan will meet its fuel consumption

from the same pipeline.

• As major portion of pipeline will pass

through Pakistan so construction activities
be done by Pakistan
Syed M. Tanseer
Regional Security Issues and
Conflicts
• First and foremost, Washington views Iran as a
major obstacle, indeed a threat, to the
realization of its strategic objectives in the
Middle East, especially the Persian Gulf region.
• The control over the oil and gas resources of
the Persian Gulf region is a major US strategic
objective, the other being the security of Israel
as an ally and an outpost of the West in the
region.
• In essence, Washington considers the Islamic
Revolution as a threat to the US-friendly order
in the Middle East.
Iran’s Nuclear Program
• Iran, while insisting on its right to carry out uranium
enrichment under the Nuclear Non-Proliferation Treaty to
which it is a party, has categorically stated that its nuclear
program is peaceful in character and that it has no intention
of developing nuclear weapons.

• As of July 2012 Europe and Japan have stopped purchasing

Iranian oil as part of the new round of UN sanctions on Iran.
Iran Saudi : Sectarian And Religious Conflict
• Conflict between the two countries also played a
pivotal role in the Iran–Iraq war when Saudi
authorities pledged US$25 billion of aid to the
Iraqi government of Saddam Hussein
• 1987 Hajj Incident.
• March 2007 visit of Ahmadinejad's to Saudia was
significant. During the coverage countries were
referred by the press as "brotherly nations“.
• In 2009, Saudi prince Faisal said in a press
conference with Hillary Clinton that the "threat
posed by Iran demanded a more immediate
solution than sanctions." A statement condemned
by Iranian officials.
Iran Qatar Relations Economic conflict
• Mostly Cordial
• Iran Qatar Share the south
Pars Gas Field. Its 20% of
all proven GAS reserves in
the world. 51 trillion Cubic
Meters.
• Its 99% of all GAS reserves
of Qatar and 38% of Iran’s
proven reserves.
India’s Mistrust on Pakistan Military conflict
• India was initially actively
involved in the GAS pipeline
project but backed out due to US
pressure and Mumbai Attacks in
2008.

• Further more it was reluctant to

Hand over its energy future to
Pakistan by committing to this
project. India BTW will have to
pay a royalty fee to Pakistan as
Transit Fee if it joins the project.

• India’s needs at the moment are

not that pressing as Pakistan's.
Cognition and Personalization Perceived Conflict
• Saudi Arabia feels a severe threat from Iran,
although Iran has never talked of attacking
any Muslim country.

• US conflict with Iran can be considered as

perceived conflict as it is based on the
assumption that Iran is pursuing nuclear
ambitions, which would in turn destabilize
the whole of middle east.
Intentions
• Saudi Arabia is behind the scenes opposing the pipeline. Offered a
bail out plan for energy shortage and Credit line to stop pakistan
form proceeding.
(Source http://dawn.com/2012/04/15/iran-gas-pipeline-saudi-offer/)

• America has said it on many occasions that it is against this

pipeline, but has done little to provide viable alternatives and help
for the energy starved Pakistan.

• Pakistan has until now successfully resisted the pressure and is

going ahead with the pipeline project, but is finding it hard to
obtain funding for the project.

• Iran has completed its part of the pipeline and is very keen on
making this project a reality. It has offered a $500 million credit line
to Pakistan for the project. Iran has also re-invited India to join the
project
Behaviors Pakistan, The Baluchistan Issue
• The challenge IP Gas Pipeline may face is the
security situation in Balochistan.

• The major portion of pipeline's length will be

passing through Balochistan and thereby, if
built, will face major security peril.

• Do we have a sound political and security plan

to take the Baloch nationalists on board?

• Historically, there is a tendency of sabotaging

developmental projects if there is a perception
that their economic interests have been
overlooked.
Behaviors Pakistan, The Baluchistan Issue
• Now seemingly the IP firmly in place, the strategic
spotlight focuses even more on Baluchistan.

• The port of Gwadar, in southwest Balochistan, near

the Iranian border, is indeed bound to become a new
Dubai, but will it be US version of Dubai or Chinese,
only time will tell.

• This all raises the crucial question: how will

Islamabad deal with ultra-strategic Baluchistan.

• Gwadar - a port built by China - is the absolute key. It

is the essential node in the crucial, ongoing, and still
virtual Pipelineistan war between IPI and TAPI.
Kashif Ali
Socio Economic Impect
Socio Economic Benefits
 The government estimates that the power
crisis in the country reduces economic
growth by between 2% and 2.5% of gross
domestic product every year.

 Supplies from Iran could go a long way

towards helping to mitigate that crisis.

 Larger gas fields tend to be far cheaper to

extract gas from Iran
Socio Economic Benefits
• Current formula is defective as it allow Pakistan
to have gas at around 87 % of crude oil price
but price should be lowered as Turkey and
Armenia are importing gas at much lower price
from Iran

• Cost of gas offered to Pakistan was around 2$

per MMBTU and now it is at around 14$
MMBTU.

• There is need to delink the gas price from oil

price in international market and fortunately
Iran is willing to consider gas pricing
concessions for Pakistan
Socio Economic Benefits
• It will meet the demand of fuel in pak region.

• Less expenditure on the transportation .

• Economic ties between the countries will be

strengthen.

• It might be a strong economic block in the south

Asia.
Socio Economic Benefits
• Gas would be purchased for power generation
and it would enable Pakistan to generate 5000
megawatts Power.

• According to official statement, based on

Japan Cocktail price, Pakistan will have to pay
$1.5 billion to Iran per annum.

• Power generation and usage of imported gas

by heavy industries would result in annual
saving of up to $ 1 billion in furnace oil
imports.
Socio Economic Benefits
• if the crude oil remains at $50 per barrel. An
annual saving of $ 735 million, compared to if
the equivalent quantity of LNG is imported for
power generation.

• The replacement of imported oil with imported

gas will increase energy security both in terms
of security of supply as well as security of price
in view of long term contract with dedicated
source of supply and guaranteed consumption.
Socio Economic Benefits
• It will give relief to the hard pressed infrastructure
of ports, roads and railways which are used in
movement of imported oil upcountry.

• The South Asia region will benefit from the Iran

Pakistan pipeline project as it will provide a
foundation for future economic growth, peace and
cooperation throughout the region.

• It will result in a shift towards more gas driven and

environment friendly energy economies of two
major energy consuming countries.
Socio Economic Benefits
• Significant direct and indirect economic
benefits during the construction and over the
life of the project will be generated through
– Employment
– Transit fees
– Availability of clean fuel
– Economic and industrial growth.
• The project will create major investment
opportunities for the entire region including
downstream business.
Dr. Irum
Recent Progress and Effect
of IP Project On South Asia
Region
Recent Progress
• Meeting between Pakistan PM and Iran
President in 86th UN General Assembly
Session both leader underlined the
need for early completion of project

• PM in an interview in Us said that needs

gas very badly. "We have to run our
power plants and we need gas for them.

• There is an acute shortage of gas in

Pakistan, so we have to import gas from
somewhere.“
Recent Progress
• Pakistan PM in an interview said that we would
proceed "unless US give us the gas, or the $3
million a day."

• Pakistani petroleum minister met with Iranian

counterpart in meeting held on 8th October 2013
to provide $2 billion for the construction work .

• Iran has already built more than 900 kilometers of

the pipeline on its soil

• Iran has completed its part of the pipeline from an

Iranian gas field and has long pressed Pakistan to
build its part of the scheme.
Effects on The Region
In spite of US threats and possible sanctions on Pakistan, this project
has many positive effects on SouthAsia.
• Economic advantages
– This project will help Pakistan to overcome poverty and
eradicate joblessness as President Asif AliZardari stated during
the inauguration ceremony, “The Iran Pakistan gas life line will
help to eradicate terrorism, bring prosperity to the region and
overcome poverty”.
– This project will create 10,000 jobs during construction and 3000
after completion.

– it will help Pakistanis especially Balouch is to get a permanent

job and root out poverty. If this pipeline extends to India or
China then it will benefit the whole region
Effects on The Region
• Regional co-operation
– European countries came closer by virtue of
such projects and then European Union came
into being.

– If IP Gas Project becomes successful then South

Asian Countries may come closer and may lay stone
of Asian Union.

– Asia may emerge as a powerful region because it is

the richest continent.

– US and otherworld powers don’t want to see it as a

power so they are creating hurdles.
Effects on The Region
• Trust of foreign investors
– Pakistan is facing a worst power breakdown of its
history so our factories are shutting down gradually.

– Therefore foreign investors even local investors are

fleeing from the country and transferring their assets
to foreign banks.

– If The IP Gas Pipeline project becomes successful,

confidence of investors will restore and they will
come to our country.
– Pakistan may become an economical hub for the
whole region so it will be useful for whole region
Effects on The Region
• Benefits to other regional countries
– According to The US Department of Energy’s International Energy
Outlook 2007, world demand for energy is projected to grow by 57% by
2030.

– Energy demand will grow most rapidly in India and Pakistan and other
Asian countries that are not members of the Organization for Economic
Co-operation and Development (OECD).So all South Asian countries will
be willingly to join this project in future.

– Another reason of joining may be that natural gases are less polluting
than coal or oil.

– If Pakistan imports LNG then it will cost $18 per MMBTU and gas
through TAPI project will cost $13 per MMBTU while gas through IP
costs $11 per MMBTU.

– So it is the easiest and cheapest way to fulfil energy needs.

– It will help to run their factories well and bloom their economy
 Disadvantages

PAK-IRAN GAS PIPE LINE

Summary
• Hence we see that the pipeline project has a
great impact on the economy of three
countries.

• In addition, in spite of meeting fuel demands

this might become a strong block in the region.

• Pakistan will be able to save its reservoirs for

the next 15 years.
Conclusion
 Natural gas is an important need and an important
asset for any country.

 Besides, natural gas being an economical resource of

power generation is very important these days.

 Pakistan is already facing a shortage of power;

therefore, it needs it badly.

 In such an hour of need Pak-Iran gas pipeline has the

capacity and capability of satisfying the overall needs
of Pakistan efficiently and taking Pakistan out of this
energy crisis.
Recommendations
 Pipeline does not bring peace but peace
brings projects such as cross-border gas
pipelines. Pakistan needs to move ahead,
play its due role to complete the project.

 Constructive engagement and diplomatic

reconciliation with US rather than
confrontation should be our focus
Recommendations
• This IP pipeline presents Pakistan with an
opportunity to establish itself as a reliable
energy corridor or energy transit hub thereby
not only achieving energy security for itself but
also earn substantial amount of foreign
exchange in terms of transit fees and royalties
from pipeline by luring India and China into
the project.

• It is imperative to address the Baluchistan

problem properly and justifiably as to
removing this major bottle neck hindering this
enormously vital project.