Pakistan continues to grapple with challenges in meeting the natural gas demand, driv­en by increasing energy demand, infrastructure constraints, and supply-demand im­balance. Pakistan is fac­ing a critical situation with its natural gas re­serves, which have been depleted by more than 69% of the total reserves.

The total reserves of natu­ral gas resources of Pakistan corre­sponded to 63.24 trillion cubic feet (TCF). Out of the total, 43.73TCF has already been utilized, leaving a remaining balance of 19.51TCF. At present, natural gas production stands at 3,390MMCFD (million cu­bic feet per day). At the current pro­duction rate, domestic natural gas is projected to be depleted in fif­teen years. Pakistan boasts an im­pressive gas network spanning over 13,775 km of transmission, 157,395 km of mains, and 41,352 km of ser­vice gas pipelines to meet the needs of over 10.7 million consumers na­tionwide. Approximately 520,801 new consumers are expected to be supplied with natural gas during FY2024. The government is active­ly working on policies to boost do­mestic gas production and increase imports to meet the growing ener­gy needs of the country.

The pipeline is set to transport 310 billion cubic feet of gas annu­ally in its initial phase, with an ex­tendable maximum capacity of 1.4 trillion cubic feet. Currently, Iran has geared a 700-mile pipeline on its end, while Pakistan has primed a 500-mile pipeline with further progress put on hold.

Iran touts an estimated 1,200 trillion cubic feet (Tcf) of proved natural gas reserves, making it the world’s second-largest after Rus­sia. Yet, Iran’s potential to maxi­mize energy product exports is hindered by the strict US sanc­tions, limiting its export capa­bilities. These sanctions restrict access to global markets and fi­nancial networks, which hampers trade. The Iran-Pakistan pipeline project has encountered numer­ous obstacles, such as geopoliti­cal tensions, financial constraints, and international sanctions, re­sulting in slower progress than formerly anticipated.

In February, the Cabinet Commit­tee on Energy (CCoE) made the de­cision to begin work on the initial phase of the 80-km segment of the Iran-Pakistan (IP) gas pipeline with­in Pakistan, running from the bor­der to Gwadar, to address Pakistan’s pressing natural gas demands. Paki­stan sought an exemption from the U.S. regarding the sanctions on Iran to restart the IP gas pipeline proj­ect. However, the U.S. declined to provide any leeway. The U.S. firmly rejected the project but also shared its concerns about it.

Pakistan needs to prioritize the completion of the IP gas pipeline project this year to avoid a hefty $18 billion penalty, which is three-fold the current foreign exchange reserves of the State Bank of Paki­stan. Pakistan is a sovereign coun­try and has the supremacy to make decisions in the best interest of its people. The IP gas pipeline project has the potential to significantly impact the welfare of the general public by ensuring energy securi­ty, as 78% of households current­ly lack access to natural gas. While households with access to natural gas face 16 hours of load-shedding due to limited availability.

The IP gas pipeline project has the potential to enhance the well-being of the people of Pakistan by cutting the price of gas by two-thirds. As an example, the pipeline is priced at $11 per million Brit­ish thermal units (MBTU) in con­trast to the $18 per MBTU of im­ported LNG. This project will save $2.3 billion annually by substitut­ing the expensive imported fur­nace oil currently used as fuel in power plants in Pakistan.

This project will enhance Paki­stan’s geo-strategic position by po­tentially turning it into a corridor for supplying natural gas to ener­gy-deficient countries such as Chi­na, India, Bangladesh, and others.

Pakistan should prioritize the ongoing execution of the IP gas pipeline project while managing its diplomatic relationship with the U.S. In the past, the U.S. has imposed sanctions on the import of Russian gas supplied through pipelines across European coun­tries. The sanctions were a di­rect result of Russia’s invasion of Ukraine. However, 15% of gas in European countries is still im­ported from Russia, accounting for 8% of Russian gas exports. It is worth mentioning that 29 out of 31 NATO member countries, ma­jor allies of the U.S., are from Eu­rope and did not fully implement U.S. sanctions on Russia. They jus­tify imports from Russia by point­ing to the self-interest of their citi­zens and the need to sustain their industrial sector.

Considering the significant bene­fits of this project for Pakistan, the newly elected government must devise strategic solutions to com­plete the gas pipeline, notwith­standing the U.S. sanctions on Iran. The project’s success will not only benefit the people of Pakistan but also enhance the government’s po­litical capital as it moves forward with the completion process.

Waqas Shair
The writer is a research associate at the Center of Economic Planning and Development (CEPD), Minhaj University Lahore. He is pursuing his Doctor of Philosophy degree at the University of the Punjab. He can be reached at waqas.eco@mul.edu.pk; waqasshair689@gmail.com