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Long-awaited Asian energy grid gets going finally
Monitoring Report
THE region’s energy and petroleum ministers in their meetings in
Islamabad, last week, completed their negotiations and readied the
agreements for constructing two transnational gas pipelines. The two
projects will cost $15.1 billion. The efforts to provide energy to
the region were topped by Iranian President Mahmoud Ahmadinejad’s
commitment in talks in Islamabad this week with President Musharraf
and Prime Minister Yousuf Raza Gilani. President Ahmadinejad, aware
of China’s interest in the IPI gas pipeline project, also welcomed
the proposal for inclusion of China in the project. In addition, he
also agreed that Iran will provide 1,100 megawatts electricity to
Pakistan immediately. The supply will be through the existing grid
network connecting Iran and Pakistan via South Western Pakistani
province of Balochistan.
Indian Minister for Petroleum and Natural Gas Shri Murli Deora, and
his Pakistani counterpart Khwaja Muhammad Asif concluded the talks
following several rounds of negotiations for IPI which had been
attended by Iran. In separate negotiations for the second project —
Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline,
the four countries agreed to go ahead with the project. The
countries were represented by Turkmen minister for oil & gas
industry Dr Baymurad Hojamuhemadov, Afghan minister of mines
Mohammad Ibrahim Adel, Indian minister for petroleum and natural gas
Shri Murli Deora and Pakistani minister for petroleum and natural
resources Khwaja Muhammad Asif. What compelled the region’s
countries to conclude the deals this week, after years of
negotiations, is the worsening energy crisis that is translating
into long power outages, major inroads into industrial output, food
shortages, and skyrocketing oil import bills. None of the
energy-deficit member-countries of the proposed Asian Energy Grid (AEG)
can afford to let it go on as their burgeoning populations are
demanding more energy immediately. Work on IPI and TAPI will start
immediately.
Dithering between the region’s members over gas and oil pricing,
costs, routes, and transit fees and royalties has been a major
hurdle. Washington’s intervention and nuclear-related controversy,
have held up the completion of the two projects so for. The plans at
the start of negotiations, in late 1990s, were to build three
transnational pipelines. These included Qatar-Iran-Pakistan-India (QIPI),
Iran-Pakistan-India (IPI) extendable to China, and TAPI. Indecision
and delays on QIPI pipeline almost killed that option, as Qatar
entered into other arrangements and committed supply of its gas to
other foreign consumers. While the option of a Qatar transnational
pipeline seems to be out, shipment of gas to Pakistan still is a
likelihood.
IPI the most promising of the proposed transnational pipeline will
cost $7.5 billion. The pipeline has the potential of being extended
to China, as was discussed by President Musharraf in Beijing last
week. The remaining differences on IPI — principally relating to
transit fees to be paid by India to Pakistan and the transportation
tariff — were sorted out, and are expected to be approved by the two
government in a fortnight. The talks in Islamabad were held between
the petroleum and energy ministers, Murli Deora of India and Khwaja
Mohammad Asif of Pakistan. The two sides have agreed on a Œtemplate’
for finalizing the transportation tariff that was linked to the cost
of construction of the pipeline. It will be calculated when
Islamabad finalises the contract to lay the Pakistan portion of the
pipeline. The transit fee, payable to Pakistan by India, is expected
to be a compromise between New Delhi’s offer of 15 cents per one
million BTU and Islamabad’s demand of 60 cents.
Pakistan Petroleum secretary, Farrukh Qayyum says, “the transit fee
was a very minor component of the cost of the project. The two sides
have agreed on a range that is mutually acceptable and based on
international practices.” The Islamabad talks also took up the
structure of the company which will implement and manage the
project. British, French, Australian, Malaysian Iranian, Pakistani
and Indian companies and financial consortia are interested in
financing and constructing IPI. At the Islamabad meetings, the
ministers agreed to start laying the 2,777 kilometres IPI pipeline
in 2009 for receiving gas from Iran by December 2012. It will carry
2.46 billion cubic feet of gas, that Pakistan and India will share
equally.
Deora has high hopes of the benefits of IPI. He said, “we have
reached an agreement on the principles of which the project will go
ahead.” Agreement was also signed in Islamabad this week for the
second project — TAPI transnational gas pipeline. It will provide
gas from Turkmenistan’s Daulatabad gas fields. The pipeline will
pass through Afghanistan, Pakistan and enter India at Fazilka on the
Pakistan-India border. The 56 inch diametres pipeline, costing $7.6
billion will provide 3.2 billion cubic feet of gas a day. The
original cost of the project was estimated $3.3 billion.
Turkmenistan gas will start reaching the region in 2015.
Afghanistan plans to consume five million cubic metres of gas per
day in the first two years, and up to 14 million cubic metres from
the third year. Pakistan and India will equally share the remaining
volume. Previously, TAPI was considered as one of the three options
along with IPI and QIPI projects. But now both TAPI and IPI are to
complement each other in view of the vastly increased gas demand of
the region. Richard Boucher the US Assistant Secretary of State and
American points-man for the region, last week outlined the
importance of India, Pakistan and Afghanistan in terms of energy and
trade. Pakistan becomes “a logical port and hub for a lot of this
trade.
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