By completely ignoring the Iran-Pakistan (IP) Pipeline in this week’s budget announcement, this government has followed in the footsteps of its predecessors by using IP as a smokescreen for doing the square root of zilch on the energy front – or so it would seem. With the UN and US sanctions looming over the pipeline, the cons beat the living daylight out of the pros on the IP front. However the million – rather the two billion – dollar question is, what is being doodled on the Islamabad drawing with regards to answering the energy – and more specifically the gas – question?
IP’s alternative was always thought to be the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, but with the A in TAPI being the biggest concern, that project doesn’t seem like being materialised any time soon – if at all. Any gas pipeline from the opulent Central Asian zone would need to traverse the volatile North of Afghanistan, before it enters Pakistan, while any commercial activity with Iran is accompanied with the dreaded “S” word. Petroleum Policy 2012, and the new prices for foreign excavating firms, would result in an increase in exploration activities, but that process would take a lot of time, and we need a short-term solution to the gas troubles.
With pipelines seemingly being buried under the political pressure and terroristic threat, there seems to be only one feasible way of importing gas without ringing any global alarm bells: LNG.
I was fortunate enough to have a little chat with renowned political scientist, game and economic theorist Farrukh Saleem on Friday and his take on IP’s exclusion from the budget was pretty interesting. In addition to the sanctions and the fact that we have no money to import IP gas at $15 per unit, he categorically stated that pipelines are a thing of the ‘60s and ‘70s. When one considers the volatility in the region, pipeline construction does seem like being too much of a risk for the government to take. And hence it is actually the construction of LNG terminals that supersedes the construction of pipelines in terms of feasibility in our neck of the woods.
LNG, liquefied natural gas, is a convenient and useful means of transporting natural gas over long distances and purpose built ports are terminals exclusively built for LNG import. LNG imports in Pakistan are scheduled to kick-start this year with the government expecting to import around 2bcm (billion cubic metres) of LNG this year. This gas would be acquired on the spot market and would be received at Port Qasim. With discussions already going on with the US and Qatar regarding LNG import, international supply contracts are said to be allocated for around 8bcm in the near future. And if the recent noise being generated in the Petroleum and Natural Resources ministry is anything to go by, newly appointed Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi seems to be pretty keen on LNG import.
Recent developments reveal that we are also having talks with India regarding import of 400 million cubic feet of gas per day, through a pipeline being built from Jalandhar to Wagah via Attari. LNG will be gasified by the Indian side, and then pumped into the pipeline. However, with so many other bones of contention between the two countries, this would be another pipeline constructed under the backdrop of political ramifications – just like most other bilateral or multilateral pipelines.
The safest option for the time being does seem like LNG import, and the government needs to focus on constructing more LNG terminals to facilitate the import. Performance on the energy front is what this government is going to be judged on five years from now, and LNG import would be a good path to start taking baby steps on.
The writer is Energy & Finance Correspondent, Pakistan Today