Pipeline - A Pipedream For the Time Being

The much-hyped Iran-Pakistan-India (IPI) gas pipeline project has again hit roadblocks and doubts are surfacing if it will ever become a reality. Despite reassuring words by India's Petroleum Minister Murli Deora, Iran's insistence on revising gas fees every three years has created worries for the partner countries.

The issue of transit fees to be paid by India to Pakistan is already a nagging sore which is yet to be resolved. In addition, Iran is believed to be going slow on providing any exploration and production plans for gas supplies to the project. Policymakers who appear gung-ho about the project in public are privately indicating concern about Iran's failure to provide any data about the source of supplies as well as its tough stance on the pricing issue. 

The $7 billion gas pipeline project has been viewed as the panacea for India's energy drought but it may meet the same fate as the earlier Oman-India pipeline project. Even that project had faced the same question marks on security and technical issues as the IPI one and it ultimately ended with Oman declaring that it had committed its gas reserves for supply to other countries.

The pattern looks set to be repeated with the latest tiff over gas pricing with Iran.

In case Iran insists on revising prices every three years, it will not be possible for India and Pakistan to enter into any agreement. Besides, official sources say Iran has not given any firm indication of an exploration and production plan for gas supply to this project. In addition, it is supposed to allocate fields to meet India and Pakistan's requirements of gas for the next 25 years.

India has been keen on the project largely because it would help meet the country's energy needs. Currently domestic petroleum production is stagnating and the volume of oil imports is shooting up. As much as 70 percent of the country's crude oil needs are now being bought from abroad at extremely high prices of over 50 dollars per barrel. The country is desperately in need of cheap and efficient energy supplies.

While the gas finds in the offshore Krishna Godavari basin have provided some hope for the future, ultimately most of our needs will have to come from abroad. A long-term arrangement to import natural gas from Iran through a pipeline is thus being seen as a solution to many of these problems.

At the same time, in case the project remains a non-starter, the country's energy security is not likely to be affected significantly since steps have already been taken to import liquid natural gas (LNG) over the long run from countries like Qatar.

India's foreign ministry, however, appears keener about the project than the petroleum ministry. It is being viewed as a way of closer economic cooperation with Pakistan and one of the few areas where the K (Kashmir) factor does not become an issue. The Left parties also are enthusiastic about the project because it means rebuffing the US, which has been vocal in its opposition to any energy collaboration between India and Iran.

In fact, an innocuous comment by Prime Minister Manmohan Singh last year about the problems inherent in the project made the Communist parties raise an outcry over the need to press ahead with the pipeline.

Realistically, however, the IPI gas pipeline project looks difficult to implement primarily because of security issues since the pipeline will pass through a large chunk of Pakistan's territory. Besides, it is clear that even if the gas is only to be purchased at the India-Pakistan border, supply stoppages could hit industry hard especially continuous process industries like fertilizers or petrochemicals. And Pakistan has already faced numerous instances of pipeline sabotage by tribal leaders and terrorists.

Once the new pipeline is set up, the gas will be committed to specific industries and power projects in India. These projects will need assured and consistent supplies of this key raw material. In case gas supplies to power projects are hit for any reason, it could affect power supply to large parts of the country.

In addition, India and Pakistan have yet to resolve the issue of transit fees. Pakistan feels that a transit fee needs to be levied since the pipeline goes through its territory. On the other hand, India has taken the stance that a transit fee is only levied when a pipeline is passing through a country that is not using the gas being transported in the pipeline. Minister Deora is believed to have urged Pakistan Prime Minister Shaukat Aziz to waive transit fees for the pipeline.

India has argued that Pakistan will be utilizing much of the gas being supplied through the pipeline that passes through its territory. Besides, it says that only a quarter of the pipeline's length would be needed for exclusive use by India. It has drawn a parallel with the Russian gas transiting East European countries to Western Europe and also through Spain to Portugal. It has also pointed out that no special concessions are being proposed for this project by the Pakistan government.

Similarly, there is a feeling that Iran's obduracy on seeking high gas prices could be linked to India having voted against that country on the nuclear issue at the multilateral arena. This contentious issue is clearly an underlying motif in many bilateral discussions with Iran. There are therefore umpteen unresolved issues relating to the IPI pipeline. It is thus quite likely to remain a pipedream for some time to come.  


More by :  Sushma Ramachandran

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