February 01, 2013Print : Top Story
ISLAMABAD: The federal cabinet has approved $1.5 billion, 785 km gas pipeline to deliver 750 million cubic feet of natural gas per day from Iran’s South Pars gas field. Intriguingly, in the 1950s, Major Malik Aftab Ahmed Khan, S.J. of the Pakistan Army Corps of Engineers (PA4117) was the first one to conceive the idea of bringing Iranian gas to Pakistani consumers. For the record, we have been at it for the past 6 decades, without much success.
Fast forward to 2013. There are two major hurdles - financing and technology. Who would finance the pipeline? There are two money centres: western banks or Chinese lenders. Where would the technology come from? Once again, there are two technology centres for such projects: western companies and Russia.
Currently, Iran is under at least three layers of sanctions that include four rounds of United Nations sanctions, the European Union sanctions and bilateral sanctions by the U.S., Canada, Australia, Switzerland and Japan. To be certain, no western financial institution will come even close to financing the project.
On October 8, 2008, President Bush signed the United States-India Nuclear Cooperation Approval and Non-proliferation Enhancement Act and subsequently India pulled out of the Iran gas pipeline project.
On December 23, 2011, National Bank of Pakistan (NBP), fearing that its foreign branches will be shut down, refused to finance the local component of the pipeline project. At the same time, Oil and Gas Development Company Limited (OGDCL), fearing that its foreign investors may pull out, also refused to participate in the project.
In March 2012, Industrial and Commercial Bank of China (ICBC), the largest bank in the world, pulled out of the project. The same month Iran offered financial aid to Pakistan to build the pipeline. For the record, in February 2012, Iran defaulted on payments worth $144 million for rice shipments from India. The same month, Iran also defaulted on payments to Ukrainian wheat exporters. By May 2012, Gazprom, the Moscow-based largest gas extracting company, was seen to be pulling out of the pipeline project.
In effect, there is neither money nor technology. Furthermore, Iran is yet to get South Pars gas field’s reserves ratified by a third party and there is Pakistan’s request to revise the price of gas downwards from 78 percent of crude to 70 percent. As it stands, Pakistani consumers would have to cough out around $13 per unit for gas from Iran as opposed to around $3.50 being charged by Sui Northern and Sui Southern. Edgar Allan Poe, American author, poet and literary critic, three in one, said, “Those who dream by day are cognisant of many things which escape those who dream only by night.”