Islamabad - “International sanctions against Iran are still hindering the execution of $2 billion Iran-Pakistan gas pipeline project, said Federal Minister for Petroleum Khaqan Abbasi on Monday.

Addressing the seminar on ‘LNG Market Analysis and Trends’ here, the minister said international sanctions against Iran were still intact, which stopped Pakistan from going ahead with the Iran-Pakistan gas pipeline project.

However he said that Pakistan and Iran were closely collaborating on all the subjects, including IP gas project, and as soon sanctions were lifted, work on the project would resume. He assured that Pakistan was committed to the IP gas project, but was facing two main issues in its implementation.

“The project requires a huge investment of $2 billion, but the investors are reluctant to invest due to two reasons: dollar transactions and ‘snap back’ clause.

“For IP, the transaction in dollars has not been allowed and due to snap back clause, investors are unwilling to invest as it allows the imposition of sanctions on the projects,” he explained. Reiterating that Pakistan was committed to the project, Abbasi disclosed that the government was working on an alternate plan.

Referring to LNG, the minister termed it a sustainable solution to the energy crisis of Pakistan in the current scenario.

“LNG is short, medium and long-term solution to the gas crisis, as it reduces the oil import bill and also accelerates economic growth,” Abbasi said, adding, “LNG is cheaper than gas obtained through IP and TAPI pipeline projects.”

On the issue of linking LNG prices with Crude Oil index, the minister said no other benchmark existed in the international market, and that was why it was linked to the oil.

The minister said that even India had linked gas price with alternate fuel oil, and it was getting same price as Pakistan is getting after the revised deal with Qatar.

He said that consumers using LNG would pay its price and domestic consumers would not be burdened. Abbasi informed that Pakistan was currently importing 450 million cubic feet of LNG, which would be increased to 2.4 billion cubic feet per day (BCFD) in the next two years.

He said that gas supply to the industries and power plants was non-stop, and added that Pakistan was importing LNG from Qatar at the cheapest rates in Asia.

The minister further informed that the government was also focusing on indigenous exploration of gas reservoirs to overcome the energy shortage.

“Since 2000, however, local gas production has been hovering around 4 BCFD, while the demand has touched 8 BCFD. In order to bridge the gap between demand and supply, LNG import is the only available solution,” he added.

He said that LNG rates in Pakistan were lowest in the region. “Following Pakistan-Qatar LNG agreement, India and China also renegotiated LNG deals with Qatar and singed similar deals,” he informed.

He said Pakistan was importing crude oil, worth $15 billion, annually, out of which furnace oil imports cost $9 billion.

“Replacing the furnace oil with LNG will save at least Rs200 billion per year. LNG is the cleanest and the most efficient as compared to other fuels used for power generation,” the minister elaborated.

He said the government was expecting the private sector to come forward as the infrastructure was available to deliver LNG based gas to the consumers. The minister said that Pakistan’s energy crisis could not be solved without injecting more gas in the system. “We hope local as well as international oil/gas exploration and production companies operating in Pakistan would explore more local reserves in future” he expressed optimism.

He clarified that although Turkmenistan-Afghanistan-Pakistan-India Pipeline (TAPI) was now becoming a reality, but will take four to five years to become operational.

The seminar was attended by CEO PIP, Mark Thurber, Andrew Kurth, LLP USA, Rahat Kamal, Project Director Gasport and Mohsin Siddiqui, Granada Group of Companies Inc USA.

Mark Thurber delivered his presentation on the LNG contracts and negotiations, while Rahat Kamal delivered a lecture on the LNG receiving terminals, design, storage and project structure. Mohsin Siddiqui spoke about LNG markets trends and regional structures.

Mohsin also said that low gas prices would stay for next six to seven years. “Investors are looking for possibilities to supply LNG to Pakistan,” he said, and suggested, “Long term contracts should not be linked with oil as Japan, Korea and China are concerned about their long-term contracts linked with oil. These countries sign everything in the shape of contracts, and the Chinese are now desperate to sell these contracts.”

He further said that even Japan was working on gas benchmark to link LNG prices. “Linkage between oil and gas is going to fade away due to advance renewable technology,” Mohsin added.

Rahat Kamal said that the government was working on second LNG terminal and Pakistan Gas Port Limited had been declared a successful bidder.

“We are hopeful that LSA will be signed by end May and the project will be completed in one year,” he said.