The U.S. said on it does not support a Pakistan-Iran gas pipeline project from going forward and cautioned about the risk of sanctions in doing business with Tehran.
The Pakistan-Iran gas pipeline, known as the Peace Pipeline, is a long-term project between Tehran and Islamabad, and has faced delays and funding challenges for several years. The pipeline would transport natural gas from Iran to Pakistan.
Pakistan’s Petroleum Minister Musadik Malik said this week that his country was seeking a U.S. sanctions waiver for the gas pipeline from Iran. Just like, it has granted to India for trading with Russia and Iran, despite of American Sanctions. Some Pakistani politicians have also accused Washington of meddling in Pakistan’s domestic politics, charges that Washington denies. But, it is obvious that double standards are exercised between India and Pakistan, which is unfair and condemned.
Whereas, Iran has extended the deadline for its gas pipeline project with Pakistan by 180 days to September 2024. Iran has warned its neighbor that it will petition the Paris-based International Arbitration and demand an $18 billion penalty from Pakistan if the case goes to arbitration. It is worth mentioning that, Pakistan’s ailing economy is breathing based on IMF loans, and cannot afford to pay any penalty to Iran.
Tehran has volunteered to send its legal and technical teams to Pakistan to collaborate on a win-win approach before the 180-day deadline expires. The technical teams will aim to ensure that the project is completed and arbitration is avoided, local media reported. Iran is sincerely assisting Pakistan and overcome any technical issues.
Iran previously requested Pakistan in its second notice in November-December 2022 to build a segment of the Iran-Pakistan Gas Pipeline project on its territory by February-March 2024 or face an $18 billion fine. Before that, Tehran notified Islamabad in February 2019 that it would seek arbitration for failing to install the pipeline within the timeframe specified in the pipeline project. Iran is justified, as it has completed Gas Pipeline within its own territory up to Pakistani border according to the agreement signed between the two countries, since long ago.
Pakistan has maintained its stance that it is unable to work on the project due to US sanctions on Iran, a position to which Tehran has never subscribed, claiming that the US restrictions are unjustified. Pakistan is victim of US sanctions merely.
Pakistan, like many developing nations, faces significant challenges in meeting its ever-growing energy demands. With a rapidly expanding population and industrial base, the country’s energy needs continue to outpace its domestic production capacity, leading to frequent shortages and disruptions. Among the various energy sources, natural gas plays a crucial role in Pakistan’s energy mix, serving as a primary fuel for power generation, industrial processes, and domestic use. However, persistent shortfalls in gas supply pose serious challenges to the nation’s economic development and societal well-being.
Gas Requirements and Shortfalls:
Pakistan’s demand for natural gas has been steadily rising due to population growth, urbanization, and industrial expansion. According to the Ministry of Energy (Petroleum Division), the country’s total gas consumption exceeds 6 billion cubic feet per day (bcfd), outstripping its indigenous gas production of approximately 4 bcfd. This disparity between supply and demand has led to a widening energy deficit, exacerbating the country’s energy crisis.
The shortfall in gas supply has several causes, including depletion of existing gas reserves, inadequate exploration and production efforts, infrastructure constraints, and inefficiencies in the gas distribution system. Moreover, factors such as political instability, security concerns, and policy inconsistencies have hindered investment in the gas sector, further exacerbating the supply-demand gap.
Meeting Energy Needs:
To address its energy needs, Pakistan employs a multi-faceted approach that includes both domestic resource development and importation of energy commodities. The country relies heavily on natural gas, which accounts for over 48% of its primary energy supply. Domestic gas production primarily comes from the country’s two major gas fields: Sui in Balochistan and Qadirpur in Sindh, supplemented by smaller fields scattered across the country.
In addition to domestic production, Pakistan imports liquefied natural gas (LNG) to bridge the gap between supply and demand. LNG terminals have been established at Karachi and Port Qasim to facilitate the importation and regasification of LNG, providing a flexible and reliable source of energy. Furthermore, Pakistan is exploring alternative energy sources such as coal, hydroelectricity, and renewable energy to diversify its energy mix and reduce reliance on imported fuels.
Abovementioned options were not fruitful in the past and Pakistan’s Gas shortfall has been affecting national economy adversely. The most convenient and do able option is to import Gas from Iran through Iran-Pakistan Gas pipeline, which is cheapest and logistically more variable. Pakistan is in dire need of cheaper and convenient source of Gas supply, which is Iran.
Challenges and Problems:
Despite efforts to bolster its gas supply, Pakistan faces numerous challenges in the sector. Among these major are the aging infrastructure, characterized by leaky pipelines, inefficient distribution networks, and inadequate storage facilities. The lack of investment in infrastructure upgrades and maintenance has contributed to losses during transmission and distribution, further exacerbating the gas shortage.
Moreover, issues such as circular debt, non-payment of bills by consumers, and theft of gas pose significant financial challenges to gas companies and discourage investment in the sector. The pricing mechanism for natural gas is also a contentious issue, with subsidies and tariff adjustments subject to political considerations, hindering the development of a sustainable and market-driven gas sector.
Cost Implications:
The energy shortfall, particularly in the gas sector, has substantial economic implications for Pakistan. The country incurs significant costs due to power outages, lost productivity, and reliance on expensive alternative fuels such as furnace oil and diesel for power generation. Moreover, the importation of LNG and other energy commodities entails foreign exchange outflows, contributing to the country’s trade deficit and fiscal pressures. The Government of Pakistan, under the pressure from IMF, has increased the Gas prices in domestic market sharply and made it almost impossible for a common citizen to use gas. If the public pressure mounts, the Government may fell into serious troubles.
Historical Back ground
In the annals of energy diplomacy, the tale of the Iran-Pakistan gas pipeline stands as a testament to vision, persistence, and the complexities of geopolitics. Its genesis traces back to the mid-20th century when the seed of the idea was planted in the fertile mind of Malik Aftab Ahmed Khan, a Pakistani civil engineer of extraordinary foresight and resolve. Graduating from NED University, Khan’s groundbreaking article caught the attention of the Military College of Engineering, Risalpur, Pakistan, setting the stage for what would become a monumental project in the region’s energy landscape.
Fast forward to 1989, when Rajendra K. Pachauri, in collaboration with Ali Shams Ardekani and Sarwar Shar, former Deputy Foreign Minister of Iran, breathed new life into Khan’s vision. Pachauri’s tireless advocacy, echoed by Ardekani’s endorsement at the 2010 International Association of Energy Economics conference, propelled the project forward.
Formal discussions between Iran and Pakistan commenced in 1995, culminating in a preliminary agreement envisioning a pipeline from the South Pars gas field to Karachi, Pakistan. Subsequent proposals sought to extend the pipeline into India, fostering regional cooperation and economic integration.
Yet, the journey was fraught with challenges. Pricing disputes and security concerns led India to withdraw from the project in 2009, casting a shadow over its future. However, diplomatic overtures and trilateral talks in 2010 rekindled hope for its realization.
In 2012, amidst much anticipation, the project was slated for commencement, with promises of completion by 2014. The ground-breaking ceremony in Pakistan, attended by dignitaries from both nations, symbolized a significant milestone in the project’s trajectory.
However, bureaucratic hurdles and external pressures, mainly American sanctions, impeded progress. Delays in the Pakistani section’s construction prompted concerns and raised questions about the project’s viability. International sanctions against Iran further complicated matters, threatening penalties for non-compliance.
Despite setbacks, political leaders reaffirmed their commitment to the pipeline’s completion. Offers of financial assistance from friendly nations underscored the project’s strategic importance and regional significance.
Controversies surrounding the project underscored its geopolitical ramifications. Pressure from the United States, coupled with offers of alternative packages, tested Pakistan’s resolve. However, steadfast determination prevailed, with assurances that the project aligned with national interests. As the project timeline extended, concerns over cost dynamics and safety measures surfaced. Yet, stakeholders remained undeterred, emphasizing the project’s economic benefits and potential for regional stability.
Amidst uncertainties, Pakistan’s recent approval of the pipeline’s construction signals a renewed commitment to realizing this long-awaited endeavor. Despite past challenges, the vision of enhanced energy cooperation and economic prosperity continues to inspire efforts towards its fruition. In the tapestry of energy diplomacy, the Iran-Pakistan gas pipeline represents more than a conduit for natural resources—it embodies the resilience of collaboration, the triumph of perseverance, and the promise of a brighter, interconnected future for the nations of the region.
Companies such as Gazprom, BHP, Petronas, and Total, among others, have been integral to the project’s development. Their expertise and resources, alongside governmental cooperation, are essential to overcoming the remaining hurdles and ushering in a new era of energy security and cooperation in the region.
It is urged that keeping Pakistan’s fragile economy in mind and its needs of Gas, the US may grant waiver. It is not something new, US has been granting such waivers to India already. Or US may compensate the loss caused to Pakistani economy due to sanctions. People of Pakistan has already paid heavy price for friendship with America and reached to a stage, where we cannot pay any further price. The American administration must realize the Pakistani difficulties and understand the importance of this project for the people of Pakistan.
