On 10 January Iran’s National Gas Company announced that within 30 days it would start construction on an ambitious pipeline project to link the country’s gas fields to energy starved Pakistan. The project has been in the planning stage for over 15 years, but if completed by 2014 the pipeline will transport 2.15 million cubic metres of gas per day to Pakistan, transforming the country’s economy. However, the Iran-Pakistan (I-P) pipeline faces a number of serious political and security concerns which may mean that it never realises its potential.
Pakistan's energy crisis
Most commentaries on Pakistan focus on the country’s chaotic political and security scenes. Yet, at least as important, is Pakistan’s serious energy crisis. Pakistan suffers from an electricity shortfall of 5,000 megawatts per day, with even large urban areas facing crippling power cuts. The government claims that power shortages reduce GDP by two per cent per year, though the real figure could be higher. And demand for electricity is likely to rise in future, as currently at least 30 per cent of the population has no access to grid electricity.
Part of the explanation for the electricity problem is insufficient investment in the country’s domestic energy industry. However, forecasts suggest that by 2030 Pakistan will have exhausted its domestic oil and gas supplies. Thus Pakistan has been looking for efficient ways to import oil and gas, and Iran is the most likely source.
Since 1995, Pakistan has been negotiating with Iran over building the I-P Pipeline. The long negotiating process and delays partly reflects security and political challenges. The proposed US$7.5 billion pipeline would start at the Southern Pars Iranian gas field and carry on for 2500km to Nawabshah in Sindh. 1000km of the pipeline would go through the unstable south-west Pakistani province of Balochistan. Balochistan has an active separatist insurgency, faces regular terrorist attacks and its provincial government looks unable to maintain control. The province’s existing pipeline network has been attacked several times, highlighting the risk that an Iran-Pakistan pipeline would face.
A further challenge is political. Initial plans suggested that gas from Iran could transit via Pakistan to India, and possibly even to China. If realised such plans would allow Pakistan to access substantial transit fees and could strengthen Indian-Pakistani economic co-operation. The difficulty is that despite India’s energy needs, it is reluctant to participate in the project amidst disapproval from the United States.
Pakistan’s involvement in the project, unsurprisingly, too has raised concern in the US. American opposition stems from their attempts to isolate Iran, while a completed pipeline would give Tehran access to a large and near certain market. The US position has slowed down the construction of the pipeline. In this context it is important to note that while Iran and Pakistan signed a deal to construct the pipeline in March 2010 movement since has been stalled. In fact, Pakistan’s president, Asif Ali Zardari cancelled a December 2012 visit to Tehran where he was meant to finalize a deal to finance the project, likely due to US pressure. Nonetheless, Pakistan has, and will likely continue, to persist with the I-P project despite US opprobrium.
The necessity of the I-P project is compounded by the lack of serious alternatives. The US has proposed a Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, but that project suffers from even worse security problems. The proposed route from the Dauletabad Gas Field in Turkmenistan is through the unstable Afghan provinces of Herat, Kandahar and Balochistan. Thus despite backing from the US and Asian Development Bank the ‘TAPI’ pipeline is unlikely to come to fruition in the near future.
There are no easy solutions to Pakistan’s energy deficit. The status quo is untenable and the TAPI pipeline is probably unrealistic. Thus despite the difficulties with the I-P pipeline, it is Pakistan’s best option but with so many obstacles it is an ambitious and risky project. As a result, Pakistan’s energy security remains a distant prospect.
Written by Harish Natarajan, Intelligence Analyst at AKE Limited, a global security and risk management firm. For more information on AKE’s services please email: firstname.lastname@example.org or call +44 (0)20 7816 5454. You can also view the website at www.akegroup.com.
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