Iranian President's Pakistan Trip Proves Fruitless – so far
Iran’s president Hassan Rouhani said that gas and power exports were at the top of the agenda for his two-day visit to Pakistan, which started on March 25. Before departing for Islamabad he even said that Iran could meet Pakistan’s energy needs, especially for gas and power. But at time of press no announcements had been made – not even the vague memorandums of understanding that crowned his recent trip to Europe.
Gas deal
Pakistan should have been importing Iranian gas at the rate of 22mn m³/d since the beginning of 2015, but it has yet to start building pipelines in its territory.
Iran offered a $500mn loan to Pakistan in 2013 to encourage it to build $2bn worth of pipelines running 800 km in its territory, but then Tehran cancelled both the loan proposal and the completion of the remaining 200 km section of what would have been a 900 km-pipeline in its own territory: the seventh cross-county pipeline.
After Pakistan and China signed an agreement in 2015, the hopes for Iranian gas deliveries to Pakistan rose. As a part of a $45bn package, China would build an LNG terminal in Gwadar and link that with a $700km-pipeline to Nawabshah in Pakistan to supply demand from 4.5-GW of power generation capacity, now suffering from a fuel shortage. For now, the LNG terminal is projected to take Qatari LNG. Pakistan and Qatar signed a 15-year LNG deal worth $16bn in early 2016.
Qatar has started exporting 3.75mn mt/yr of LNG, or more than 14mn m³/d of natural gas to Pakistan’s Karachi LNG terminal, because the Gwadar facilities are incomplete.
The advantage of this route for Iran is that Gwadar is 100 km from Iran’s borders and the managing director of the National Iranian Gas Company Hamid Reza Iraqi said March 24 that “Pakistan has agreed to build a 100 km-pipeline from Gwadar port to Iran's borders to import gas.”
However, during Rouhani’s visit to Pakistan, in the company of minister Bijan Zanganeh, there was no ministerial confirmation of this.
It seems the Gwadar-Nawabshah pipeline cannot transit Iranian gas because it is too small. Ghiyas Abdullah Paracha, the central leader of the All Pakistan Compressed Natural Gas Association announced in July 2015 that the LNG terminal can handle about 17mn m3/d but the pipelines can only carry about 9mn m3/d.
He also said the ageing infrastructure could not sustain the pressure of imported gas and it must be improved immediately, “otherwise all efforts to tackle the energy crisis using Iranian gas would go down the drain.”
Pakistan is considering building another LNG terminal in Qasim port, but this port is very far from Iran’s borders, even further than Karachi, but very close to Nawabshah.
In Pakistan, the gas load management is mostly restricted to Punjab Province –very far from Iran borders – as it supplies about 5% of the country’s gas but consumes almost 46% of it.
On the other hand, according to Pakistani sources, LNG arriving in any particular month will fetch 13.37% of the preceding three-month average price of Brent crude, or around $167/’000 m³ when oil was trading at $33/barrel early this year.
The figure is less than Iran, Turkmenistan and Russian charge their clients. In 2015, the Russian gas price for the EU was about $250/’000 m³, while, Iran sold gas to Turkey at above $225/’000 m³ and Turkmenistan’s gas to China was above $220/’000 m³ reportedly. Iran’s gas price for Turkey was about $480/’000 m³ in the first half of 2014, when the oil price was about $105/bl.
Power deal
A part of Pakistan-China’s $45bn deal package has been set to add a dozen of power plants, but almost all of them are solar, hydropower or coal-fired.
For now, Pakistan’s share in Iran’s 10bn kWh electricity export is about 4%. Recently, Pakistan’s local media reported that Islamad hasn’t paid the Iranian electricity price since 2011 due to sanctions. After Rouhani’s visit to Pakistan, Iran announced that Pakistan agreed to consider increasing power import from Iran by 40%.
However, before the trip, Pakistani media reported that Islamabad was likely to sign an agreement with Iran to purchase 38 times more than the current level. Iran’s deputy energy minister Houshang Falahatian also told IRNA on March 22 that a 3 GW cable to Pakistan is possible.
For now, Pakistan has more than 20 GW of generation capacity, of which hydro accounts for 7.097 GW and thermal plants account for 15.007 GW.
Iran desk