There is no official word as yet from Delhi. But Hojjatollah statement marks a positive development. Delhi had walked out of the tri-lateral talks citing security concerns as also the price factor.
India critics, however, viewed the Delhi decision as yielding to American pressures in the wake of civilian nuclear deal with Washington. In a broad sense, therefore, return of India to the tri-lateral pipeline talks will make the critics squirm with unease.
Under a formula worked out by technical experts in 2007, Pakistan and India had agreed to complete documentation on the transportation tariff, transit fee, gas volume sharing, gas sale and purchase agreement. India is looking for 3.2 BCF of gas per day, while Pakistan wants 2.1 BCF a day for 30 years.
Initially, Pakistan is likely to receive 750 mmcbt of gas per day, while the estimated cost of the pipeline inside Pakistan, from the point of entry in Balochistan upto Nawabshah, is put at $1.2 billion.
PAK’S VESTED INTEREST
More than India, it is Pakistan which has a vested interest in seeing the mega project through. It is gripped by severe energy crisis; the entire country is reeling under power outages. Industrial and business capital, Karachi is witnessing public anger against official and unofficial power cuts. The authorities have ordered gas load-shedding, and two-day weekly CNG shutdown in all towns after increasing POL prices steeply.
The IMF has just forced the Zardari government to give an ‘electric shock’. From the New Year Day (Jan 1, 2010), the power tariff will go up by more than 13 per cent and all electricity subsidies will end to the dismay of middle classes and farmers alike.
The import of 750 mmcfd of natural gas will support the production of 4,600 megawatts of electricity, for which 7.5 million tonnes of HSFO is required. Based on current price of Brent, use of natural gas for power generation will mean a huge savings for Pakistan which is broke financially. Price of gas at the Pak-Iran border would be $8.05/mmbtu while HSFO would cost $11.95/mmbtu. If industry switches from furnace oil to natural gas as the feed stock, cost of production will also come down substantially.
Another beneficial fall-out will be handsome dividends in the shape of annual royalty from India, expected to range from $200 million to $500 million.
Gazprom, Russia’s state-controlled gas giant, has shown interest in the construction and management of the pipeline. Its representatives attended the Pakistan-Iran talks held in Tehran, at which the main focus was on the management of the pipeline and gas transit to India. Iran and Pakistan have agreed to fund the project at a debt-equity ratio of 70:30, requiring debt financing of $872 million and an equity investment of about $373 million.
SECURITY CONCERNS REMAIN
Security concerns refuse to die down in the meanwhile. Out of the total length of 2,200 kilometres, 707 kilometres of the pipeline will have to pass through Pakistani territory, mainly in the volatile Balochistan province, to the Pakistan-India border, from Iran’s Pars gasfields.
Only by addressing the security concerns of India, Pakistan can hope to achieve early financial closure and also completion of the project by 2013 as originally scheduled.
Prime Minister Yusuf Raza Gilani has just come up with a Baloch package. But the Baloch nationalists have rejected the ‘Aghaz-e-Haqooq-e-Balochistan’ package, since, according to them, the package fails to address the core Baloch issue. In that sense, the Gilani package, though a good beginning, has come unstuck.
Islamabad must address all genuine grievances of Baluchis to restore normalcy in the largest and most backward province which in turn will facilitate ambitious ventures like ‘peace pipeline’.
