rediff.com: Pakistan keen on Iran gas pipeline to India

A plan to build a pipeline to carry gas from Iran across Pakistan to India may seem ambitious considering Islamabad's poor relations with its neighbours, but the Pakistanis are keen.

Industry sources say Pakistan is rekindling ties with Iran to help build the 2,500 km (1,500-mile) pipeline that would terminate in arch-enemy India.

The proposed pipeline would provide a windfall in transit fees for Pakistan but is fraught with problems because of political tension with India, the fastest-growing energy market in the world.

But analysts cite the example of Europe, which purchased gas from the former Soviet Union during the Cold War, as a strong argument for the project.

"If Western Europe can buy gas from Russia at the height of the Cold War then there is no reason why these two (India and Pakistan) can't work out something," said one official at a European oil and gas exploration company.

The military government of General Pervez Musharraf, which came to power in a coup last October, is pushing hard to get the project agreed with Iran.

Musharraf, who discussed it during a recent visit to Tehran, sees his country's economic salvation in natural gas deposits and information technology and is championing the project to break an age-old dependence on cotton and textiles as Pakistan's main export earners.

The Iran pipeline plan moved up Pakistan's economic agenda once the military realised that even quick development of the country's gas fields would make only a slight dent in its dependence on imported oil.

Another pipeline project from Turkmenistan via war-torn Afghanistan has been put on hold after the US company Unocol withdrew as financing proved impossible because of the fighting among the Afghans.

Islamabad is trying to patch up relations with Iran, troubled by differences over the fighting in Afghanistan where Pakistan supports the ruling Taleban and Iran the opposition.

The government faces even tougher political problems with India. Pakistan almost went to a fourth war over the disputed Himalayan region of Kashmir last year, a showdown that has turned cool relations icy and dashed prospects for early peace talks.

A top bureaucrat in the oil ministry said the government had told Iran it was willing to go ahead with the project despite the troubles with India.

"We have in principal conveyed our acceptance to the Iranians for this project and now the ball is in their court. They have to go back to India and seek the same kind of political commitment as ensured by us," Abdullah Yousuf, secretary to the Ministry of Petroleum and Natural Resources, said at a recent conference.

Iran and India have also agreed to conduct feasibility studies on the pipeline that would stretch from offshore Iranian gas fields in the Gulf to northwest India via Pakistan.

Iranian officials say Australia's Broken Hill Pty Co and France's TotalFinaElf are keen on the project.

Yousuf said the proposed pipeline, which could take four years and more than $3 billion to complete, would enable Iran to sell four billion cubic feet of gas a day to India.

It would also generate $600 million in annual transit fees for Pakistan and cover some of the country's own energy shortfall by procuring some of the Iranian gas, Yousuf said.

Iran has more than 840 trillion cubic feet of proven natural gas reserves, 16 per cent of the global total. But it currently produces only 3.1 per cent of the world's output.

Pakistan's uses 385,000 barrels of oil a day of which 85 per cent is imported, eating up a quarter of its export earnings.

Those oil imports, which accounted for 43 per cent of Pakistan's energy needs, left an import bill of almost $3 billion in the fiscal year that ended in June, up 30 per cent over the previous year because of soaring international prices.

Pakistan also has natural gas, but output of 2.4 billion cubic feet a day meets only 39 per cent of its energy needs and falls short of domestic demand by one billion cubic feet.

The country hopes that quick development of new gas fields could pump that shortfall in four years, but government officials say imports would still be needed.

Industry sources said the government also needs investment to expedite the development of its newly found gas and speed up exploration to discover potential reserves estimated at 26 trillion cubic feet.

New exploration was hampered after the government revised its pricing regime last year which set oil price bands for gas prices against an earlier policy that linked gas prices to prevalent international oil prices.

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