US lobbying to terminate Pak-Iran gas pipeline

The United States supports importing LNG as a viable alternative to the Iran-Pakistan pipeline that would be an important step in relieving Pakistan’s natural gas and electric power shortages.
In a secret cable posted on the WikiLeaks, the US Ambassador Anne W. Patterson in late 2008 sought support from her government to help Pakistan in LNG imports.
The cable says that the US government could potentially be helpful in addressing some of the potential infrastructure bottlenecks, in particular the deepening of the Port Qasim navigation channel and provision of night navigation equipment. The cost for the improvements of facilities were assessed at $100 million and support was sought for feasibility of providing technical and financial support to the PQA to help make LNG re-gasification a reality.
It reports a meeting between the then Petroleum Minister Syed Naveed Qamar and US Special Representative for Af-Pak Richard Holbrooke in which the minister said the government has nearly completed a deal to import liquefied natural gas (LNG) supplies and build re-gasification facilities in Port Qasim, and said that the Economic Coordination Committee (ECC) was expected to approve 4Gas’ re-gasification facility by the end of January, as OPIC support made it financially viable. It said The ECC would also approve long-term LNG supply contracts and a second re-gasification project. Although the GOP preferred gas supplies from Qatar, it would sign long-term contracts with whatever group could provide supplies at the lowest price. Qamar agreed with Holbrooke that the GOP and USG needed to work together to change public perceptions of the U.S. and GOP by informing the public of their joint efforts in the energy and water sectors could improve US perception in the country. He said the viability of imported LNG depended on the landed cost of natural gas being less than that for imported refined fuel oil (RFO), and better still, less than the delivered price of natural gas imported through the proposed Iran-Pakistan pipeline. According to rough GOP estimates, the delivered price of re-gasified LNG is less than RFO and 10 percent more than the proposed Iran pipeline. He said the projects would be completed by the end of 2011, with the U.S.-owned company 4Gas supplying 500 mcfd of gas and a second facility 200 mcfd. The second company is Vitol-Fauji, though Qamar did not name the project.
According to the cable Qamar said that dredging the Port Qasim navigation channel to allow for the transit of large LNG tankers would facilitate the import of LNG. He encouraged the USG and US companies to look into how they could get involved in this $200 million project. He said that Pakistan would prefer to get LNG supplies from Qatar but would take “the cheapest offer on the table.” Qamar said that Shell, which controls sizable Qatari LNG, had offered Pakistan LNG supplies at prices higher than those recently offered to other countries. He noted that fuel suppliers wanted to charge a premium due to concerns over the GOP’s ability to ensure payment. Holbrooke asked whether Qamar was concerned about Chinese competition for Qatar’s gas supplies, and offered to lobby Qatari PM Hamad bin Jassim al-Thani on Pakistan’s behalf. The cables reveal that Qamar said this would not be necessary as the “global glut” of LNG put Pakistan in a good negotiating position. He added that Pakistan was not negotiating directly with Qatar but with Shell for Qatari supplies. Another cable quotes Ministry of Petroleum’s Special Secretary G.A. Sabri saying that the GOP will “most likely” award contracts to two firms 4Gas and a Vitol-FOTCO consortium to build floating LNG re-gasification terminals. He said the GOP had set an internal deadline of December 31 to formally approve the projects as well as to enter into long-term LNG supply contracts. The terminals would be completed in 18 to 24 months and supply up to 800 mcfd of natural gas. The high BTU fuel would be used primarily for power generation, not domestic use.
Sabri said Sui Southern Gas Pipeline Limited (SSGPL) had the capacity and finances to quickly build the 20 km of pipeline needed to off-take the gas, but worried that the Port Qasim Authority’s (PQA) lack of technical and organisational capacity to dredge the required navigation canal could delay the projects. If the LNG projects go as planned, it would be a significant step to close Pakistan’s current 600 mcfd gas shortfall, preventing the imposition of draconian gas rationing measures and adding up to 4000 MW to the national power grid. He said the projects would require the construction of jetties, land based storage facilities, as well as the use of floating re-gasification and storage units (FRSUs). There currently is no plan to turn the projects into higher-capacity, onshore re-gasification facilities, though Sabri did not rule this possibility out for the future. He explained that it would be politically difficult to enter into unpredictable obligations for gas supplies. Sabri said Shell would most likely be the lead gas supplier to the Vitol-FOTCO facility. He mentioned BP, GDF Suez and Mitsubishi, however, as possible fuel suppliers for 4Gas. The imported gas would be used for power generation, as it is a higher BTU than gas produced domestically, making it unsuitable for household use. Sabri said it was technically possible to water the gas down for domestic use by injecting nitrogen, but that there was no compelling reason to do so. The 800 mcfd supply of gas could produce roughly 4000 MW of power. The net gain to the power sector would be less than 4000 MW, depending on whether the new gas supplies would be directed towards new power plants or used to replace less efficient fuel oil in existing ones. He said he would put together a cost study of the landed price of LNG-supplied gas versus gas that could be delivered through the proposed Iran-Pakistan pipeline. Natural gas meets about 50 percent of Pakistan’s energy requirements, making the country one of the most natural gas dependent economies in the world. At the present rate of consumption, the Government of Pakistan (GOP) anticipates a natural gas shortfall in 2009. Although pipeline
discussions are on-going, no solution is in sight to assist with Pakistan’s severe energy shortage.