H.E. Amanullah Khan Jadoon, Federal Minister for Petroleum and Natural Resources of Pakistan, outlines in this special article for the IEFS Newsletter his country's two-pronged strategy for enhancing gas supplies in support of economic development: accelerated domestic exploration and imports through pipelines and in the form of LNG. He underscores that not only Pakistan, but the whole South Asia region will benefit from the Iran-Pakistan-India pipeline project as it will provide a foundation for future economic growth, peace and co-operation as well as contribute to more gas-driven and environment friendly energy economies of two major energy consuming countries.
Federal Minister for Petroleum and Natural Resources since September 2004, Mr Jadoon is an elected Member of the National Assembly representing the Pakistan Muslim League. He has earlier served as Federal Minister for Kashmir Affairs.
Pakistan's energy mix is dominated by oil and gas. Together they contribute 80% of 56 million tonnes of oil equivalent (MTOE) of primary energy supplies. The other sources include 8% coal, 11% hydro electricity and 1% nuclear electricity.
According to Government's projections in the Medium Term Development Framework (MTDF) plan, Pakistan's energy requirement will increase to over 360 MTOE in the next 25 years, more than half of which will have to be imported. Although according to this plan, contribution of oil and gas is projected to drop from the present 80% to about 64%, natural gas is still expected to meet 45% of the primary energy needs at the end of the twenty-five year period.
Pakistan is exploring various options to enhance its gas supplies which are assured, affordable and sustainable on long-term basis so as to maintain the current pace of economic development. To meet this challenge, Pakistan has adopted a two-pronged strategy focusing on: (a) accelerating domestic exploration efforts with more attractive package of incentives for producers; and (b) import of natural gas through transnational pipelines and in the form of liquefied natural gas.
One of the viable gas import options being pursued by Pakistan is import of gas from Iran to Pakistan and its extension to India. Iran as the owner of the world's second-largest proven natural gas reserves is keen to exploit this resource as a source for its revenues. The biggest potential customers of Iranian gas so far are Pakistan and India.
The Iran-Pakistan-India gas pipeline project envisages laying of 2,200 km on-land pipeline to transport gas for both the countries. The total cost of the project was estimated to be over USD seven billion in 2006.
Pakistan's Ministry of Petroleum and Natural Resources has constituted separate working groups with Iran and India to deliberate upon technical, legal, financial and commercial issues of the project. The working groups have held several one-to-one as well as joint meetings so far. Despite the complexities that naturally involve negotiating and executing such a project, progress has been achieved on key components of the project like signing of the term sheet, consensus on major items of the gas sale purchase agreement, broad understanding on project structure, and appointment of international advisors. A Pakistani advisory consortium led by PricewaterhouseCoopers has almost finalized pre-feasibility reports for the Pakistan segment of the project.
Further negotiations of the three parties are in hand to finalize this venture. The degree of earnestness displayed by all the parties, since all will benefit from it, allows us to assume an optimistic conclusion of the project.
For Pakistan, 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 the long term contract with dedicated source of supply and guaranteed consumption. It will give relief to the hard-pressed infrastructure of ports, roads and railways which are used in movement of imported oil upcountry. In addition, Pakistan will have a strategic advantage as a transit country.
The South Asia region will benefit from the Iran-Pakistan-India 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. 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.