IRAN - Pakistan Readies Its IPI P/L Section.

Pakistani Petroleum Secretary Ahmad Waqar on April 11 was quoted as saying Islamabad was planning to award contracts worth up to US$3 bn to build the country's portion of the pipeline to transport Iranian gas to India. The total cost of Iran-Pakistan-India (IPI) project has been estimated at $8.5 bn, up from an estimate of $7 bn in 2005/06. The pipeline will link the world's second largest gas reserves in Iran with India through Pakistan. Waqar said the Economic Co-ordination Committee (ECC), Pakistan's highest economic decision-making body, had approved construction of the project on a "segmented basis", adding: "Under this approach Pakistan and Iran will construct their portion of the project". Waqar, who headed Pakistani negotiations with Iran and India, said the pipeline's route through the Pakistani territory had still to be decided, but he said it would be in the range of 750-1,050 km long. The contract to build this section will be open to foreign as well as Pakistani companies.

Pakistani Prime Minister Shaukat Aziz and his Indian counterpart renewed their commitment to the project during a regional summit in New Delhi earlier this month. Waqar said construction of the pipeline would likely start in mid-2008 and expected the gas to start flowing by 2012.

Iran's official news agency IRNA on March 23 said India had threatened to walk out of the IPI project if Islamabad did not bring down the fee it wanted to charge for allowing the flow of the gas from Iran. IRNA then said: "At the beginning of the two-day technical level talks on the project, Indian officials told Mukhtar Ahmad, energy adviser to the Pakistani Prime Minister, that the transportation tariff for the 1,036-km pipeline section falling in Pakistan and the transit fee payable to Islamabad had to be brought down for New Delhi to continue in the project".

IRNA quoted a "top Indian official" as having suggested a tariff of $0.50/m BTU, while Pakistan wanted $1.57/m BTU. Islamabad was also seeking a transit fee of 10% of the gas price (price payable to Iran plus transport cost) at India's border, while India was willing to pay a maximum of 5% of the gas price at the Iran-Pakistan border. IRNA quoted the official as saying: "It is a question of $0.65/m BTU versus $0.25/m BTU. But when taken together with the transportation tariff, the price of gas at the Indian border will be almost $1.50/m BTU costlier".

After meeting with Indian Petroleum Minister Murli Deora and Oil Secretary M. S. Srinivasan, Ahmad said: "We are very hopeful we will converge on all the issues and a tripartite deal will be signed in June". He said India and Pakistan were more or less in sync with Iran's latest formula, according to which the price of gas at a $60/b price for crude oil comes to $4.93/m BTU. Ahmad added: "Like we had said previously, the Iranian price formula is acceptable to us". IRNA quoted the Indian official as saying the formula was also acceptable to New Delhi but it wanted the issues of transportation tariff and transit fee to be "resolved before communicating acceptance".