Baku, Azerbaijan, Oct. 4

By Omid Shokri Kalehsar – Trend:

Iran and Pakistan began work on the IP pipeline (aka Peace pipeline) in March 2013. The 2,700 kilometer-long pipeline is meant to deliver gas from the Assalouyeh Energy Zone in southwestern Iran to Pakistan.

Some 2000 km of the pipeline runs through Iran and 700 km through Pakistan. The generated revenue looks to be around $7.5 billion. Iran is planning to export 1.5 million cubic meters (mcm) per day natural gas to the country.

Iran has declared its intention to increase oil production and export capacity on countless occasions. Iran’s Oil Ministry has recently presented a two-fold plan to achieve this; both short- and long-term.

The short-term program first aims to mitigate the effects of sanctions and get the country’s industry and infrastructure back into shape. Iran’s short term plan is to export natural gas to neighbors and in long term to European Market, Pakistan is one of Iran priorities to export gas.

Nothwithsdtanding the mutual agreements and concrete efforts which were supposed to be followed, Pakistan by October 2017 was unable to construct the necessary infrastructure in its own territory, blaming financial issues for the problem.

The problem is further compounded given that Pakistan is also planning to buy LNG from Qatar. During the former Presdinet Barack Obama’s administration, the US asked India to use American technology and financial aid to construct nuclear facilities to generate electricity as a subsitute for import of Iranian natural gas through Peace Pipeline project. Against this background, then, it is clear that the Iran-Pakistan (IP) Project would face intense pressures.

Iran first priorities to export gas to neighbors, at present Iran hold less than 1 percent of world natural gas market and the Islamic Republic is planning to increase its share of natural gas market to 10 percent. If Pakistan wants to import natural gas or LNG form another supplier, Iran will lose Pakistan market.

In recent years, a fall in the cost of LNG has encouraged Pakistan to plan on importing more LNG from Qatar, and also from other suppliers rather than Iran.

Until 2016, Pakistan had no financial resources in its budget to construct the pipeline with Iran. According to the IP agreement, this project is expected to be completed by the end of 2018.

The significance of Iran’s serious presence in the energy equations of the time zone is greater, as we know that the US has made a great effort to remove Iran from the energy equations of the region.

A clear example of this is the US efforts and pressure on India and Pakistan to prevent the implementation of the peace pipeline and replace the pipeline with a pipeline that transports Turkmen gas to India and Pakistan. The US effort to provide Pakistan’s electricity from Tajikistan through the Casa-1000 Electricity Transmission Project is also being evaluated in the same vein.

Saudi Arabia and Qatar, struggling with heavy costs to prevent Iranian gas exchanges with regional countries through pipelines.

Before Qatar crisis, Doha followed a more active policy in terms of exports of more natural gas and LNG to its neighbors.

Iran and Qatar share South Pars Gas Field (the territory of Qatar is called the North Dome), the world’s largest natural gas field.

Qatar exports oil and LNG from South Pars field but Iran was unable to export from this field due to economic sanctions imposed on it for its nuclear program.

Iran, however, hopes that it would produce more natural gas from this field and play key role in the regional and global natural gas markets as a result of lifting sanctions.

It seems that Saudi Arabia is also playing a key role in the delay in the implementation of the IP project, as well as the pressure on the Gulf states to avoid gas exchanges with Iran.

No country is interested to lose its share in the regional and global energy market. Every country tries to maximize its own benefits vis-a-vis other oil and gas exporters and use any means to find new customer and also sell oil and gas to another exporter’s customers.

Omid Shokri Kalehsar is an Iranian energy analyst based in Washington, DC.

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