The Hindu Business Line : Is there light at the end of the pipeline?

Chennai April 6 `Handle pipeline politics cautiously,' reads the headline of a recent editorial in Daily Times, Pakistan, on the Iran-Pakistan-India (IPI) project. "India has threatened to pull out of the $7 billion gas pipeline project if Islamabad does not bring down the transit fees it wants to charge for allowing the pipeline to pass through its territory to India," notes a snatch in the March 24-dated posting. "Normally, the middle or transit country has the upper hand in negotiations, but this power of leverage depends on how badly the consumer country wants the gas."

The story of the pipeline project goes back to 1989, when the first serious proposal to export Iranian gas to India was presented to the Asian Energy Institute in New Delhi, writes Mr Roger Howard in `Iran Oil: The New Middle East Challenge to America' (www.vivagroupindia.com) .

`Political obstacle'

"Although several other international companies, such as Broken Hill Petroleum, soon picked up the idea and put forward their own proposals, all stumbled over the same political obstacle: such a link would have to cross Pakistan territory and therefore make India dependent on the goodwill of a country with which it had long had relations that were always tense... Yet without an overland link across Pakistan, the project was wholly unrealistic."

The alternative, for instance, of constructing a pipeline that ran offshore, far from Pakistani waters, was dismissed as being `technically far too difficult and financially far too demanding'. Mr Howard writes: "Laying a pipeline more than 3,000 metres underwater on a mountainous seabed was and still remains an unprecedented venture, and a proposed $10 billion deep-sea gas pipeline was cancelled in 1996 after a three-year study, which had cost more than $20 million, concluded that it was simply too hard a task."

According to some, the pipeline project may turn out to be a pipedream, in view of the US' stand against Iran. But Mr Howard sees that the strength of relationship between India and Iran is not merely due to the forex Iran may earn, as from any other potential purchaser, but because of Iran's `appetite for refined oil (gasoline)'.

Deficit in refining

In recent years, Iran has consistently had to import lead-free gasoline in large quantities, he mentions. "In 2002, as NIOC (the National Iranian Oil Company) was forced to put its nine refineries out of service while it upgraded them, the Iranians imported between 1,00,000 and 1,50,000 tonnes of mostly 95-octane gasoline each month." Interestingly, "in the course of 2005, Reliance was supplying Iran with about 25 per cent of its gasoline imports".

In a testimony on `US Policy Options: Iran's Oil and Gas Sector' before the Senate Committee on Foreign Relations, in May 2006, Ms Julia Nanay, Senior Director, PFC Energy, said (www.senate.gov) : "Despite being OPEC's second largest oil producer, Iran has a deficit in refining capacity to manufacture gasoline."

She cited a report from the Joint Economic Committee of Congress (March 2006) — that an estimated 25 per cent of Iran's gasoline imports come from Persian Gulf countries, 15 per cent from India, and the remainder from a variety of sources, including France, Turkey, Singapore, the Netherlands and China.

Smuggling

"At the same time, volumes equivalent to as much as half of the amount of Iran's gasoline imports are being smuggled abroad," Ms Nanay added. "Subsidised prices at home make it lucrative for smugglers to move this product out of the country, with Iraq being a favoured market along with Pakistan. Many people in border areas earn a living from smuggling gasoline."

She weighed the plausible idea of imposing gasoline import sanctions on Iran thus: While such a move would cut down on smuggling and also `alleviate the traffic pollution problems in Tehran', there was a flip side too. "Gasoline import sanctions might cast the US in a negative light since unlike other oil and gas sanctions, their impact would fall directly on Iran's people."

The testimony wraps up by saying that the IPI project still has a long way to go before it can be considered a serious project. "While the energy is clearly needed by Pakistan and India, there is no agreement in place yet among the three countries to build the pipeline, with the question of who would pay for it not even addressed."

More Stories on : Petroleum | Foreign Relations | Infrastructure

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page