ISLAMABAD - Sustainable Development Policy Institute (SDPI) in its report launched on Wednesday has termed the Iran-Pakistan gas pipeline project financially unviable for the country, taking the plea that the price agreed in the agreement is far high as compared to Iran’s other gas sale agreements made with some other countries.

The report, which is an independent project of SDPI, has suggested that Pakistan should try to re-negotiate on the price of gas. The aforementioned report has discussed in detail the Pakistan’s natural gas sector, performance of gas-fired thermal power plants and the Iran-Pakistan pipeline project.

The research report, while not negating the importance of IP gas pipeline, has revealed that Iran had made gas sale contract with China at much lower price but on the other side it is almost 3 times what is decided with Pakistan so it was needed to renegotiate the price.

Presenting the report, Engr Arshad H Abbasi, Energy Advisor SDPI, while speaking at the occasion told that the price was set following the formula in which gas and oil are linked with each other. He gave the example of Italy and Germany that took their cases to the International Court of Arbitration for delinking of the oil and gas pricing regarding their gas deals and also won the case from the court.

He clarified that there was no point for cancellation of the Iran-Pakistan gas pipeline agreement but renegotiation of the gas prices under the prevalent situation was needed under the clause 6.3.2 provided in the agreement. He further said that SDPI has analysed that power sector of Pakistan and in-depth studies reveal that buying gas from Iran at much higher rate cannot be declared feasible to be used for electricity generation as it will increase the cost instead of providing relief.

To substantiate his argument Arshad Abbasi said according to the agreement rate for Pakistan is more than $15/MMBTU if calculated in relation to the current JCC prices though Iran is supplying gas to Turkmenistan at a rate of $4/MMBTU. SDPI report made with his contribution also suggests that Pakistan also needs to follow global shale gas initiatives to decrease its reliance on the foreign resources.

While chairing the session, Engr Shamsul Mulk, former chairman WAPDA/Former Chief Minister KPK, drew attention towards the consistent policy failures in the energy sector, which have led to the present high costs of electricity.

He also asserted that as the cost of electricity generation from oil or coal sources is much higher, natural gas is crucial for Pakistan’s energy sector. In this scenario, Pakistan needs to import gas but the importance of mutual benefits regarding the IP project cannot be ignored and Pakistan should not compromise on pricing issues.

He stressed the need for building more dams and water reservoirs. Quoting the example, Shamsul Mulk said Egypt managed to survive 7 year long drought with the help of proper water storage system of storage over Aswan.

Former Ambassador Shafqat Kakakhel, Chairman Board of Governors SDPI said that the report has been launched with the aim to contribute to the ongoing national dialogue over energy security of Pakistan. There is a dire need of improving transmission and distribution system, developing clean sources of energy, controlling indiscriminate spread of gas connection and maintaining smart meters, he maintained.

He said Pakistan has already witnessed capital flight due to energy crisis Pakistan as a lot of textile units had already shifted to Bangladesh that has also caused massive un-employment in the country.

Earlier, in his welcome remarks, Dr Abid Qaiyum Suleri, Executive Director, SDPI highlighted that SDPI’s report on IP project presents an objective analysis of Pakistan’s energy scenario while taking into consideration the financial and economic ramifications of the project. He also emphasized the significance of this report and the IP project in the context of US-Pakistan relations as it is believed that Pakistan’s Prime Minister will have discussion about the country’s energy crisis with his US counterpart in Washington. Dr Suleri said that the report gains significance also from the fact that Pakistan will have to consider the international natural gas scenario and the position taken by United States given its diplomatic relations with Iran.