Pakistan to Go Ahead With Iran Gas Pipeline Project (Update1)

Pakistan to Go Ahead With Iran Gas Pipeline Project (Update1)
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By Khaleeq Ahmed and Khalid Qayum

Jan. 15 (Bloomberg) -- Pakistan plans to proceed with a project to import natural gas from Iran through a $7.6 billion pipeline that’s been delayed for more than a decade because of political and security concerns.

“The price demanded by Iran is high,” Pakistan Petroleum Secretary Mahmood Salim Mahmood said in Islamabad today, without providing more details. “We have recommended a renegotiation of the price.”

Iran, which has the world’s second-largest natural-gas reserves, is in talks with Pakistan and India to export gas through a pipeline from its South Pars field. Tensions between India and Pakistan have delayed the project, while the U.S. wants the South Asian nations to abandon the pipeline to isolate the Middle Eastern country on concern, which it says is building nuclear weapons.

“We have told the government to go ahead with the project as other fuels are expensive,” Hina Rabbani Khar, economic adviser to the Pakistan prime minister, said in an interview after a meeting of a steering committee today. Pakistan may scrap the project because of a pricing disagreement, the News newspaper reported today.

Iran and Pakistan have said earlier they will proceed with the project even if India backs out.

The Iranian section of the pipeline is 80 percent complete and 200 kilometers (124 miles) from the Pakistan border, Seyed Reza Kasaeizadeh, managing director of the National Iranian Gas Export Co., said in an interview in Vienna on Nov. 24.

Energy Shortage

The price for Iranian gas to Pakistan won’t be less than $200 for 1,000 cubic meters, Kasaeizadeh said.

Pakistan and India, with a combined population of more than 1.3 billion people, need the pipeline to meet energy shortages. Relations between the two countries have been strained after the Nov. 26-29 terrorist attacks in Mumbai that India says were carried out by a group supported by Pakistan’s official agencies. Pakistan says “non-state actors” were behind the attacks.

Natural gas meets half the energy needs of Pakistan. The country’s daily output of 4 billion cubic feet of gas won’t meet demand next year. Pakistani factories including textile makers are threatening to shut down because of gas and electricity shortages this and last month. The factories account for more than half of the country’s exports.

To contact the reporters on this story: Khaleeq Ahmed in Islamabad at paknews@bloomberg.net; Khalid Qayum in Islamabad at kqayum@bloomberg.net.