Pakistan approves gas sharing with India

Islamabad, Apr 11: Pakistan has approved gas-sharing with India and the gas-pricing mechanism at the Iran-Pakistan border under the 7.4-billion-dollar Iran-Pakistan-India(IPI) gas pipeline project.

The approval was accorded by Economic Coordination Committee (ECC) of the cabinet, which met here last evening under the chairmanship of Prime Minister Shaukat Azi.

''The ECC constituted a committee to oversee the project implementation, including feasibility studies, inter-governmental agreements, framework agreement and other related discussions on the pipeline,'' the Dawn newspaper quoted petroleum ministry officials as saying.

An official said that gas at the Pakistan border had been indexed with Japan customs cleared crude (JCC). In practical terms, this gas will be priced much higher than the locally produced gas which is also indexed with international oil prices. Currently, the average gas production price in Pakistan is 2.6 dollar per mmbtu.

The Iranian gas under the approved formula will translate into 3.67 dollar per mmbtu when the JCC price is 40 dollars per barrel of oil -- a rate least expected given current international prices. The gas price will be 4.3 dollars per mmbtu at 50 dollars per barrel and 4.93 dollars per mmbtu at 60 dollars per barrel.

The gas rate at the Pakistan border will rise to 5.56 dollar per mmbtu when crude prices reach 70 dollars per barrel. The tariff will further rise to 6.56 dollars per mmbtu and 7.06 dollars in case oil prices increase to 80 dollars and 90 dollars per barrel, respectively.

Petroleum Secretary Ahmad Waqar said that the ECC approved gas-sharing arrangement with India under the IPI project. Under the first phase, Iran will deliver about 2.1 billion cubic feet of gas per day (bcfd) at the Pakistan border which will be equally shared by both India and Pakistan.

Under the second phase, another 3.2 bcfd of gas will be transported by Iran. This will take total supplies to 5.3 bcfd. Of the total, Pakistan and India will get 2.1 bcfd and 3.2 bcfd, respectively.

The secretary said the construction of the project was expected to start some time next month and it would be completed in three-four years. If things proceeded according to the plan, the pipeline would start delivering gas in 2012, he said.

Mr Waqar said the ECC also approved the gas-pricing mechanism but it would not be prudent to disclose exact rates given the fact that the governments of Iran and India had yet to approve it as agreed at the joint working group level.

He said that such a price would be in the national interest of Pakistan because it would need to be seen in the context of competing fuels like oil and LNG which were on the higher side.

On project structure, he said that the three parties had also approved that the project should be constructed on segmented basis, which meant that the three countries would lay gas pipeline within their respective territories.

Iran has already started laying the pipeline from the South Pars gas field to the Pakistan border, of which some gas would be utilised in eastern provinces of Iran.

He said route for the pipeline had not been finalised yet and future discussions among the parties would be focused on this subject.

UNI