After the incredible success of Iran-Pakistan (IP) and TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipelines, Pakistan might be on the brink of sketching another smokescreen on the energy drawing board. Last week’s column addressed LNG as the potential go-to play as sanctions and Afghanistan bury any inkling of realism in IP and TAPI projects respectively. It also discussed the fact that Pakistan and India were deliberating over trading around 400 million cubic feet of gas to curtail the gas shortfall in Pakistan. This gas export is supposed to be through a 60-km pipeline from Jalandhar to Wagah, via Atari, after LNG is compressed at the Indian end. However, a closer look at the potential deal reveals that it has the same stumbling block that has become a factor in bidding IP adieu and turning down Qatar’s LNG offer: price.
In fact the per-mmbtu price that India is quoting for the export of LNG ($21) is higher than Qatar’s final offer ($17.4) and that of private suppliers ($17.7-$18.1). However, the government has been trying to get India to remove LNG from taxes and that should see the asking price come down to around $16. Even so, much like the Non-Tariff Barriers (NTBs), the tax exemption act would obviously be dependent on Pakistan fulfilling its last year’s promise of granting India the Most Favoured Nation (MFN) status.
Pakistan is currently producing only half of the 8 billion cubic feet countrywide gas demand. And hence, gas from several sources is needed to bridge the gap. Importing LNG from shipments and even through this pipeline with India would be a welcome quick-fix, considering that the construction of the 60-km pipeline wouldn’t take as long as the constructing the 785 kilometres of Pakistan’s part of IP or as long as it takes to sort out the mess in the north of Afghanistan. However, since IP and TAPI were largely undone by political antagonism, one must remember that any bilateral deal between India and Pakistan (not the best of chums of course) is anything but a cakewalk.
It goes without saying that for this India-Pakistan pipeline to come to realisation, a lot of diplomatic struggle would be needed. The current government would have to reiterate its intention of granting India the MFN status and start working on it; thence India might mull the LNG exemption from the tax net. Furthermore, if the project is completed Pakistan would then have to be aware of the fact that unless serious amelioration in bilateral ties is seen, Pakistan would be one mishap in the Indian territory away from losing 200 mmcfd of gas coming. This is the primary, if not the only, reason why India backed out of the IP project in 2009. And even though the Mumbai Attacks had a huge part to play in that decision, the fact remains that unfortunately Indo-Pak ties are always one tragic incident away from self-capitulation. If the India-Pakistan pipeline project does go ahead, the Indo-Pak gas dispute might become the new Indo-Pak water dispute.
Despite the delay in granting MFN status to India the bilateral trade between the two neighbours has risen in the past year or so. In the recently culminated fiscal year imports from India increased by 15 percent and exports jumped by an impressive 30 percent. These numbers and Nawaz Sharif’s reiteration regarding prosperous ties with India connote that Indo-Pak relations might be on the verge of turning the proverbial corner. However, there’s still a long way to go before all that intent is cooked together to prepare a scrumptious serving of fruition. The previous IP has turned out to be a pipedream, regardless of the government rhetoric. It would be best for all concerned parties if IP pipeline 2.0 doesn’t turn out to be that way as well.
The writer is Energy and Finance Correspondent, Pakistan Today. Email: khulduneshahid@gmail.com, Twitter: @khuldune
India-Pakistan Pipeline: Another pipedream?
