Iran builds new gas pipeline

Pakistan is to become a key buyer of Iranian natural gas at a time when relations with Washington are at their most strained in recent years.

Work on extending the Iran-Pakistan gas pipeline will begin in the next six months and is set to be complete by 2014, according to Asim Hussain, the Pakistani natural resources minister. Some 1,100 km of the 2,700 km pipeline has already been completed on the Iranian side of the border, stretching from the South Pars field to the frontier with Pakistan.

The energy crisis in Pakistan has given way to a gas shortfall of 2.5 billion cubic feet, but Iranian sources predict that the pipeline will be able to deliver more than 740 million cubic feet of gas per year. If so, this will make up 30% of Pakistan’s current gas deficit.

The Iran-Pakistan pipeline was originally conceived as a trilateral design that would extend to India, leading it to be dubbed the ‘Peace Pipeline’. But India withdrew from negotiations last year in the wake of U.S opposition to the plans. The Iranian gas and oil sector has long been the target of international sanctions that seek to limit the possible development of nuclear technology and isolate the country’s economy, but the pipeline will not contravene any specific restriction. India’s reluctance to pay transit fees to Pakistan also led New Delhi to withdraw from negotiations.

Iran possesses the world’s second-largest reserves of natural gas and its fields produce 5.5 trillion cubic feet per year. Supply from the $7.4 billion pipeline to Pakistan will be used to help remedy chronic power shortages.

These cost Pakistan 2 per cent of its annual GDP and damage 25,000 industrial enterprises. The country’s own oil and gas supplies are forecast to be exhausted by 2025 and 2030 respectively.

Despite American reservations, Pakistan seems determined to continue cordial relations with Iran. President Asif Ali Zardari visited Tehran last month to join three-way talks with his Iranian and Afghan counterparts, Mahmoud Ahmadinejad and Hamid Karzai. These negotiations focused on closer cooperation on issues ranging from tackling terrorism to narcotics trafficking.

In contrast, ties between the Pakistani administration and the US remain frosty in the wake of Osama bin Laden’s killing. Pakistan is the third biggest recipient of US foreign aid, but its impending reliance on Iranian gas will do nothing to improve relations with Washington.

Source: The Financial Times