Iran Pakistan Gas Pipeline Final

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Oil & Gas Pipe line between Pakistan and Iran

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Iran-Pakistan Gas Pipeline:

Iran-Pakistan Gas Pipeline Muqeem ul Islam PhD Public Policy & Government

Introduction:

Introduction History 1950 - Conceived by Aftab Ahmed Khan 1989 - Conceptualised by Rajendra K Pachauri (TATA) & Ali Shams Arlekani 1994 - Discussion started between Pakistan & Iran 2005 - India agreed to be included in the project 2007 - Pakistan & India agreed to pay US $ 4.93 per BTU to Iran 3

Introduction (contd..):

Introduction (contd..) (India subsequently withdrew ostensibly over price and security concern) 2009 - Inter-governmental Framework Declaration signed 2010 - GSPA Agreement signed in Ankara 2013 - The EPCF agreement was finally initialed on 25 February - A ground breaking ceremony took place on March 11, 2013, which was attended by both the Presidents. 4

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5 IRAN AFGHANISTAN PAKISTAN Herat Char Rah Kandahar Quetta Multan Fazilika Yoloten-Osman Gas Field Asaluyeh Iran Shahr Gwadar Nawabshah IP- 1935 km, Iran segment 1150 km (900 km completed) Pakistan segment 780 km, $ 1.5 b 750 MMcfd

Introduction (contd..) :

Introduction (contd.. ) Pipeline: 1935 km Iran Segment: 1150 km Iran completed: 900 km Pakistan segment: 785 km Distance Volume Finance Cost US $ 1.245 billion Price: 80 % of Intl oil price Penalty: US $ 200 m/month Gas volume: 750 MMcfd Extendable: 1 bcfd Pipeline dia : 42/48 inch Additions of India/China Debt-equity ratio of 70:30 ISGS share: 51 % Debt financing : US $ 872 M Equity investment: US $ 373 M Iran assist: US $ 500 M Highlights of IPGP 6

South Pars/North Dome Gas Field:

South Pars/North Dome Gas Field Gas Reserves Iran’s 40% Res World’s 8% Res 1800 Trillion cubic feet World’s largest Shared by Iran & Qatar Total Area: 9700 Sq. km South Pars Area: 3700 Sq. km Introduction (contd..) 7

Issues & Challenges:

Issues & Challenges Pakistan’s Energy Challenges High energy intensity: low efficiency of converting energy into wealth/GDP – energy intensive industry, inefficient appliances Dependence on imported oil: low exports resulting in balance of payment issues 33% power generated by oil: high cost electricity affecting export competitiveness and seriously affecting economy 8

Issues and Challenges (contd..):

Issues and Challenges (contd..) Increasing gap between demand and supply affecting energy security and slowing down economic growth Transformation/transmission/distribution losses/theft compounded by poor governance Lack of: vision, coherent policy, integrated strategy, mismanagement 9

Issues and Challenges (contd..):

Issues and Challenges (contd..) IPGP – Issues & Challenges Stringent reaction by international community Threats of US sanctions Increasing overdependence on foreign fuel Ignoring indigenous hydroelectric potential and Thar coal Baloch perspective Delay in the project may cause penalty Inclusion of India and China under international pressure 10

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Sector Wise Gas Consumption Source: Gas Companies 12 Analysis (contd..)

Gas Demand Supply Projections:

Gas Demand Supply Projections 13 MMCFD Analysis (contd..)

Reasons of shortfall/gap between demand-supply:

Reasons of shortfall/gap between demand-supply Depletion of existing resources; fields are like human beings, they become less productive with time & ultimately die Disproportionate addition of new gas connections: politics Increased gas demand for power generation due to insufficient generation from other sources e.g. hydel /wind etc. CNG Sector, massive increase in number of pumps/vehicles Extraordinarily high levels of Unaccounted for Gas(UFG) Disproportionate reliance on gas due to pricing of competing fuels Alternatives in energy mix not exploited Analysis (contd..) 14

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Average Levelized Cost of New Generating Technologies for 2016 (US C/ Kwh of 2009) USC/KWh Gas generation is least cost Analysis (contd..) 15

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Yoloten-Osman Gas Field TURKMENISTAN IRAN AFGHANISTAN PAKISTAN Herat Char Rah Kandahar Quetta Multan Lahore Fazilka Nawabshah Iran Shahr Asaluyeh IP Iran Segment, 56” = 900 Km completed Pak-Iran Border Delivery Point ‘Mile 250’ IP Pakistan Segment = 785 Km 750 MMcfd , 42/48” $ 1.245 billion TAPI Turkmenistan Segment = 145 Km TAPI Afghanistan Segment = 735 Km TAPI Pakistan Segment = 800 Km Sulaimanke IP Pipeline - 1935 Km Iran Segment – 1150 Km Pakistan Segment – 785 Km TAPI Pipeline 1,680 Km 3.2 Bcfd, 56” $ 7.6 billion Iran Shahr to ‘Mile 250’= 250 Km to be completed Gwadar

LNG Option:

LNG Option Qatar & international traders are keen to supply LNG USAID is assisting with process as US vendors are vying to supply LNG Cost expected to be US$ 18 / unit vs. $ 4/unit for local gas Terminal construction, shipping and advance gas supply cost makes this a $ 1.5 billion undertaking There are doubts about logistic viability of Port Qasim Analysis (contd..) 17

Exploration and Production:

Exploration and Production Increase E&P activities in KP /Balochistan-restricted Offshore exploration-yet to take off Improving local field security and logistics-problem area Human resources & technical skills-poor Joint ventures with foreign companies-dwindling Very capital and equipment intensive-not possible locally Analysis (contd..) 18

IPGP-Cost and Benefit Analysis:

IPGP-Cost and Benefit Analysis Prospects A win-win situation for Pakistan and Iran Addition of 5000 MW to national grid Savings on import of expensive crude oil/LNG Creating partnership/latent interdependence and harmonising conflicting strategic visions Creating job opportunities in Balochistan and Sind Prosperity in Pakistan by generating economic activity Analysis (contd..) 19

IPGP-Cost and Benefit Analysis:

IPGP-Cost and Benefit Analysis Fulfilling Pakistan’s longstanding dream of Energy transit country Prospects of India and even China joining IPGP Gwadar becoming hub of trade activity Challenges / Cautions IPGP may trigger US sanctions; caution needed Increasing overdependence on foreign fuel; attention to own resources emphasised Ignoring indigenous hydroelectric potential and Thar Coal Analysis (contd..) 20

IPGP- Cost and Benefit Analysis:

IPGP- Cost and Benefit Analysis Further alienation of Baloch people, if not included in the project Real benefit only if India/China join IPGP Penalty/ force majeure With expansion of Shale gas, the price may become untenable Analysis (contd..) 21

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22 SSGC LNG (2012-14): 0.75 Bcfd Private LNG (2012-13): 1.0 Bcfd TAPI (2016): 1.35 Bcfd Conventional New Discoveries Existing Gas Fields IP (2014): 0.75 Bcfd Anticipated Constrained Demand Natural Gas Shortfall Mitigation Analysis (contd..)

Conclusion:

Conclusion Pakistan has relentlessly increasing demand for energy. Vast potential of hydel and alternate energy sources were ignored for decades. There is heavy reliance on expensive imported oil especially for power generation. While importing LNG is more expensive and indigenous hydroelectric sources are years away from producing electricity, IPGP looks more viable project to cater for Pakistan’s medium term energy needs. Pakistan must learn to adapt conservation measures. The era of cheap energy is indisputably over and the outlook is exceedingly challenging with no quick fix! 23

Recommendations:

Recommendations Import of gas inevitable given the rising demand Pakistan must reduce dependency on foreign fuel by: Developing indigenous hydroelectricity potential Thar lignite’s development Focus on alternate fuels and power sources (promotion of LPG, biogas etc.) Exploration of Shale Gas & off shore gas Energy conservation and efficiency programs 24

Recommendations (contd..):

Recommendations (contd..) Consumption control through price rationalization Stringent measures to control theft and transformation losses Pakistan needs diplomatic articulation to avoid US sanctions due to IPGP The Project must be completed in-time to avoid penalty Sense of ownership to the people of Balochistan by employing them in the Project 25

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Thank You !

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