Pakistan’s Double-Standards Policy on IP Project
Gas accounts for more than 60 percent of Pakistan’s energy mix. But the country’s gas production is on the decline and its gas shortage is so serious that some parts of the country are facing serious load shedding problems.
Energy shortage has always had destructive impacts on Pakistan’s economy and the country’s industrial facilities have had to operate far below their production capacity. As a result, many job opportunities have been lost in this country.
Pakistan Industrial and Traders Associations Front (PIAF) has called on the Islamabad government to ensure the completion of the multi-billion-dollar gas pipeline under construction from Iran to Pakistan.
In a statement on Monday, PIAF Chairman Malik Tahir Javed said implementation of the project before 2014 would greatly help Pakistan overcome its energy shortages.
Pakistan’s Water and Power Federal Minister Khawaja Asif has said that load shedding in the country would not end by 2018.
Asif said Pakistan was incurring Rs1, 000 billion in annual loss from power generation. He continued saying government institutions in Sindh are defaulters of Rs53 billion, Azad Kashmir Rs5 billion, Punjab Rs4 billion and Khyber Pakhtunkhwa Rs1 billion.
The water and power minister said it was expected that Punjab, Balochistan and Khyber Pakhtunkhwa would clear their electricity defaults by June. The federal minister, however, expressed reservations over Sindh and Azad Kashmir clearing their defaults.
Khawaja Asif added that the federal government had directed provinces to appoint a time for the early closure of markets.
Pakistan’s energy demand has been rising sharply since 2005. The country is currently producing 4.3 bcf of gas, still below its 6-bcf demand. In order to preserve its economic growth, Pakistan has to find a solution to make up for its gas shortages in the coming years.
For years, the issue of balancing Pakistan's supply against the demand for electricity has remained a largely unresolved issue. Pakistan faces a significant challenge in revamping its network responsible for the supply of electricity. Pakistan's electricity producers are now seeking parity in returns for both domestic and foreign investors which indicate it to be one of the key unresolved issues in overseeing a surge in electricity generation when the country faces growing shortages.
As of 2013 massive long-standing electricity shortages continued with long-standing failure to provide reliable service and rampant corruption being met by public protests, unauthorized connections, and refusal by consumers to pay for intermittent service. Electricity generation in Pakistan has shrunk by up to 50% over recent years, due to an over-reliance on fossil fuels.
In 2008, availability of power in Pakistan falls short of the population's needs by 15% .Pakistan was hit by its worst power crisis in 2007 when production fell by 6000 Megawatts and massive blackouts followed suit. Load shedding and power blackouts have become severe in Pakistan over recent years. The main problem with Pakistan's poor power generation is intensifying political instability, together with rising demands for power and lack of efficiency.
Provincial and federal agencies, who are the largest consumers, often do not pay their bills. China, India, Central Asia, and Iran have been offering to export electricity to Pakistan at subsidized rates but the government of Pakistan has not yet responded to the offers for unknown reasons.
Experts say Pakistan’s demand for electricity is forecasted to reach 36,000 MW in 2015, 54,000 MW in 2020, 80,000 MW in 2025 and 113,000 MW in 2030. The average annual growth rate is eight percent.
Due to rising demand and a failing power infrastructure severe electricity shortages have occurred in Pakistan. This has led to widespread rolling blackouts that have paralyzed industry and led to protests and rioting. Power outages can last 6–8 hours a day in the cities and many more in the rural areas.
According to Mahnaz Parach of "Network for Consumer Protection ",children can't do their homework. Housework doesn't get done, as washing machines and other appliances cannot work. When you go home from work, you have no idea whether there will be electricity at home. Your whole life is disturbed."
Pakistan is already running short of nearly 8,000 MW of electricity and its power plants are short of 400 mcf/d of natural gas to run.
Pakistan started talks with Iran two decades ago in the hope of importing gas. Initially, India was a party to talks. A peace pipeline stretching from Iran to India while cutting through Pakistan was to be built. After some time, India dropped out of the project under pressure from some governments. But Pakistan continued talks with Iran due to its serious gas need. Iran and Pakistan finally signed an agreement in 2010 for the construction of a 907-kilometer pipeline from Assaluyeh in southern Iran to Chabahar Port in southeastern Iran. The pipeline was expected to be then extended into Pakistan’s territory for gas delivery to Iran’s eastern neighbor.
Iran immediately started building its own section of the pipeline and finished it last year. But Pakistan took no action after so many years and it continues to demand more time from Iran. Under a contract signed between Tehran and Islamabad, Pakistan has to finish the construction of its own section of the pipeline for receiving gas from Iran by December this year.
Pakistani officials continue to claim that they have failed to build the pipeline under the pretext of sanctions slapped on Iran by Western governments over its disputed nuclear program. But analysts say the pipeline has not been built due to financial problems in Pakistan.
Affordable Price
Pakistan is studying several other options including liquefied natural gas (LNG) imports from Qatar, India-Pakistan pipeline and Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline to overcome its energy crisis. But the important point is that gas purchase from Iran is the most economical option, while purchase of LNG from Qatar and TAPI would be costly for Pakistan. For buying LNG from Qatar, Pakistan would have to build LNG terminals and storage tanks and this country is not in a position to do so now. Contribution to TAPI project does not sound logical because of security challenges in Afghanistan. The project is still on the paper despite many rounds of talks. Gas imports from India will also cost Pakistan too much because India has no surplus gas to sell to Pakistan and it will have to convert imported LNG into gas before piping to India. LNG prices are high in Asian markets and Pakistan will never be able to pay for gas imports from India.
No practical action has been taken for these projects, while Iran-Pakistan pipeline is half-finished.
Iran Committed to Pipeline
While Pakistan has been for other options to replace Iran’s pipeline project, the Islamic Republic has sincerely completed its own section of the Iran-Pakistan (IP) project. Pakistan continues to drag its foot on the construction of its own section of the pipeline, while it will legally have to pay penalties for delaying the project. Pakistan’s Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi continues to claim that international sanctions are blocking the project. But Pakistani Commerce Minister Khurram Dastgir recently acknowledged that financial problems are the main obstacle to the project.
However, Pakistan cannot easily ignore gas purchase from Iran due to its growing need for energy.
The former Pakistani government examined four options for financing its own section of the pipeline and finally decided to propose the construction of the pipeline to Iran. But after President Hassan Rouhani took office, Petroleum Minister Bijan Namdar Zangeneh rejected the idea. The Iranian minister once said that even the Pakistanis have acknowledged that they cannot pay for the gas project.
Since Pakistanis are unlikely to finish their section of the project on schedule, they have on several occasions demanded extension of the deadline. Representatives from both countries have so far held talks to that effect.
Deadline Extension
Pakistani Prime Minister Nawaz Sharif visited Iran last May. During his meetings with Iranian officials including President Hassan Rouhani, Sharif underlined the necessity of completion of the IP project. Zangeneh recently told Iranian lawmakers that the Pakistani premier has demanded that the deadline for the completion of the pipeline be extended several months.
What’s clear is that the project will not come on-stream on schedule as Pakistan will not be able to have built its own section of the pipeline by December. The future of the pipeline remains unknown.
Full construction of a pipeline to transmit natural gas from Iran to Pakistan could become a corridor for energy transmission from the Middle East to Far East. The world is looking at Iran’s 34-tcm gas reserves. Iran should take advantage of this opportunity to win the 10-percent share of global gas trade required by the country’s national development plan. Realization of this objective requires infrastructure and identification of target markets. Regarding infrastructure, more than 34,000 kilometers of transmission line has already been laid out. Under Iran’s development plan, 70,000 kilometers is needed.