IPI project: Mandate given to negotiate gas price with Iran

Islamabad: The Steering Committee on Iran-Pakistan-India (IPI) gas pipeline project has given the mandate to Petroleum Ministry to negotiate the price of gas at 70 percent of global crude oil price.

The steering committee on IPI held a meeting, chaired by Advisor to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain, on January 15 and supported the IPI gas pipeline project, and recommended that the deal with Iran be finalised as soon as possible.

Iran recently scaled down its earlier demand, linking the price of gas from 85 percent to 78 percent of crude oil price under the still to be approved Iran-Pakistan-India (IPI) gas pipeline deal. Sources said that the steering committee recommendation to negotiate gas price with Iran at 70 percent of crude oil price would be tabled before the next meeting of the Economic Co-ordination Committee (ECC) of the Cabinet for formal approval.

After ECC approval, Pakistan and Iran would resume talks on gas pricing formula to ink the deal. The steering committee reviewed the impact of Iranian gas on thermal power generation and electricity demand is increasing at the rate of eight percent per annum.

The steering committee revealed that thermal power cost would be 3.51 cents/Kwh generated by Iranian gas if the crude oil price stood at 40 dollars per barrel. Whereas the furnace-based power generation would cost 4.24 cents/Kwh, LNG 3.51 cents/Kwh, coal 4.3 cents/Kwh and solar 11 cents/Kwh.

Sources said that thermal power generation from Iranian gas would be 30 percent cheaper as compared to thermal power produced from furnace oil in the country. However, Iranian gas for domestic consumers and CNG stations would be costlier but would be cost effective for thermal power generation as one billion cubic feet imported Iranian gas per day (bcfd) would generate 5000 MW electricity per day.

In the national grid system, the country is facing 3500 MW shortage. The power shortfall would rise to 10,000 MW per day by 2020. The country is currently facing 700 million cubic feet per day shortfall that would shoot up to two billion cubic feet per day by 2010.

The IPI project will have a 2,775-kilometre-long pipeline to transport Iran's natural gas to Pakistan and India. The project, estimated to be completed in three to five year's time, is expected to benefit energy-starved Pakistan. The pipeline would be supplied from South Pars field. Construction is scheduled to start in 2009 and the pipeline is expected to be completed by 2013, the committee was told.