ISLAMABAD: Work on the Iran-Pakistan (IP) gas pipeline has reached an advanced stage while progress on Turkmenistan-Afghanistan-Pakistan-India (Tapi) is still in initial stages.

According to sources privy to developments Pakistan has already completed Interim Front End Engineering Design (FEED) of the proposed IP project, while progress on Tapi is in an initial stage.

“Until there is peace in Afghanistan construction of Tapi is impossible and it can not be considered an alternative to the IP which can be completed within two years if the international community’s concerns over Tehran’s nuclear programme are appropriately addressed. In fact, no official agreements on security for the Tapi pipeline have made the rounds, with some experts claiming that the cost of providing security to the pipeline may be greater than the cost of constructing the pipeline itself,” a Petroleum Ministry official said.

Iran has already constructed 900 kilometers of the 1100-kilometre pipeline within its borders while 785-kilometre stretch of pipeline in Pakistan awaits construction.

Tapi, supported by the US and presented as an alternative to IP, is estimated to cost $7.6 billion to lay 1,680-km-long gas pipeline that will bring 3.2 Billion Cubic Feet per Day (BCFD) of natural gas from Turkmenistan’s gas fields to Multan and end at the northwestern Indian town of Fazilka. Under the agreement Afghanistan’s share would be 500 Million Cubic Feet per Day (MMCFD) while Pakistan and India would receive 1,325 MMCFD apiece.

As Tapi has the stamp of approval of the US financing options may be easier for Pakistan than IP.

Security would be relatively easier on the IP pipeline that is designed to pass through Khuzdar district of Balochistan province, a relatively peaceful area, and Karachi in Sindh. In case of Tapi high security risk is involved due to continued civil war in Afghanistan as some 700 kilometers of the pipeline will pass through Afghanistan.

According to official sources, IPs interim bankable feasibility study has been finalized. Work on Detailed Route Survey (DRS), Social and Environmental Impact Assessment (SEA) and land acquisition has already started. Route Reconnaissance Survey which is part of Detailed Route Survey has also been completed.

The government on March 29 invited bids for the construction of 785 kilometres of IP project from pre-qualified parties with three firms qualifying: two Chinese and one Crescent Group of Pakistan. The detailed route survey activity is expected to be completed by the end of June 2012, while the government has already invited tenders for construction of IP pipeline.

As far as financing of IP project is concerned, Iran has assured Pakistan to provide $500 million funding for the construction of the gas pipeline, while the government has collected nearly Rs 35-40 billion from Gas Infrastructure Development Cess, which would be utilised towards construction of Iran Pakistan (IP) gas pipeline and/or other energy projects.

As per draft agreement, Pakistan is bound to complete IP gas pipeline project by the end of 2014 otherwise it will have to pay a daily penalty of $ 1 million to Iran. As per draft agreement of the project, the contractor will have to complete the project within two years - 2012-14. The Government of Pakistan is expected to allow exemptions in duties and taxes on the import of certain materials required for gas import projects. EPC contractors are also expected to be exempted from sales tax for services provided on such projects.

The pipeline is likely to cost the energy-deficient country $1.25 billion, and will initially bring around 750 Million Cubic Feet per Day (MMCFD) of gas, which will be gradually increased to over 1.5 Billion Cubic Feet per Day (BCFD).

Pakistan at present has three key projects for importing gas namely IP, Tapi and Liquefied Natural Gas (LNG). According to officials and industry sources the gas price under IP project would be $11 per Million British Thermal Unit (MMBTU), for Turkmenistan-Afghanistan-Pakistan-India $13 per MMBTU and LNG at $17-18 per MMBTU.

As per official estimates, gas shortfalls are estimated to reach 2.5 BCFD in 2014-15, 3 BCFD in 2015-16 and 3.5 BCFD in 2016-17. The gap is estimated to sour to 5 BCFD by 2020-21, unless major discoveries and field developments are made in the coming years.

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