Iran-Pakistan Gas Pipeline, Benefits and Challenges
Hassan Abdullah Rasool
Publishing date: 13 May 2024
International relations today are totally dependent on doing business with each other, in simple words every country is collaborating with each other economically. The relations today rely on economic interdependence instead of going into other conflicts.
Political instability in Pakistan has caused economic instability, due to which Pakistan has taken different steps for attracting and collaborating with countries in different business fields which may have positive affect on the economic outlook of Pakistan.
The old gas pipeline project between Iran and Pakistan on which talks are going on since mid-1990s and gas sales and purchase agreement was signed in 2009, the project was paused until now due to different reasons but recently both countries have announced to start work on this old aged project.
According to Iran officials they have already completed construction of 900kms pipeline by 2011, but there is no progress seen on the Pakistani side. To avoid billion dollars penalties due to huge delay on the Pakistani side, caretaker government gave approval to begin construction of 80kms on Pak-Iran gas pipeline.
Pakistan every year is spending huge amount of imports in an energy sector, according to International Energy Agency Pakistan’s energy portfolio has the largest proportion of natural gas. Natural gas demand and imports are rapidly increasing as it is Pakistan’s largest energy source, according to an oil and gas journal, 49 percent of Pakistan’s energy needs are met by natural gas. Pakistan ranks third in the world due to usage of natural gas as a motor fuel. Pakistan is also hoping to use gas as the fuel for future electric power generation projects and for the same reasons Pakistan is looking into different ventures to increase production of natural gas and Pakistan Iran gas pipeline is one of it.
After Russia, Iran has 2nd largest gas reserves in the world, to fulfill energy needs Pakistan has collaborated with Iran because this pipeline will take about 15 months to benefit Pakistan’s energy sector and can be used as substitute of furnace oil for power generation. There will be positive outcome for Pakistan’s economy via gas flow of 21.5 million cubic meters daily, this project will also benefit Pakistan’s regional trade, investment and economic connectivity. Iran-Pakistan gas pipeline is an important project that will satisfy energy needs overall and it will fill the gap between supply and demand, also it will minimize natural gas shortage of 1,000 to 1,500 mcfd but will also help to minimize the shortage of 5000 to 6000 megawatt electricity, side by side it will also reduce oil imports. The project will also help in reservation of natural gas as Pakistan has declining reserves at the moment. Once this project is operational, Pakistan can earn a lot if it is extended to other country i.e., China or India via transit fee, that will directly impact economy of Pakistan. Another big positive outcome of this project will be related to power sector. Last but not the least IP gas pipeline will open different job opportunities in Balochistan and Sindh.
There is no doubt that this project will bring lot of benefits but with those benefits there will be challenges as well for Pakistan. The most recent challenge is of United States threat regarding sanctions due to business deals with Iran. Iran already is under three different international sanctions, though Pakistan has already rejected US warning as the same project was delayed due to same sanctions in past but now Pakistani authorities have announced that Pakistan will not back off from the long awaited Iran-Pakistan gas pipeline project, because South Korea, Japan, South Africa, China and India are the countries who are dealing with Iran in the energy fields and United States have exempted these countries.
Another challenge is of security in Balochistan, as the huge portion of the gas pipeline will be going through Balochistan, there is possibility that Indian-backed terrorists in Balochistan may try hard to sabotage this project.
Following the security challenge is the challenge of relations with the gulf countries which are not in good relations with the Iran, Pakistan may take measures to overcome this challenge as Arab countries may feel threaten from strategic shift.
It is clear crystal that this economic adventure will benefit Pakistan and will have positive impact on the economy overall, but Pakistani authorities and think tanks will have to work hard to counter every challenge that Pakistan may face due to Iran-Pakistan gas pipeline, because Pakistan is sovereign country and they have all the rights to take decision that can benefit economy and people of Pakistan.