During the recent bilateral strategic dialogue concluded in Islamabad, the US officials clearly told Islamabad that Obama administration did not appreciate the gas import plan. — File Photo

But the opposition to Iran-Pakistan pipeline has not died down. During the recent bilateral strategic dialogue concluded in Islamabad, the US officials clearly told Islamabad that Obama administration did not appreciate the gas import plan.

They have tried to raise doubts over Iran's reliability as a gas supplier and Tehran's credibility not to seek tariff revisions after completion of the project. However they were surprised over the rates on which the two neighbourly countries have struck the deal.

At current oil prices, the Iranian gas is estimated to cost Pakistan around $9 per MMBTU (million British thermal unit) and the price is capped at a maximum of $100 a barrel. This could be used only for power production because of its comparatively higher rates when compared with domestic gas price of about $4.5 per MMBTU.

While opposing the Iranian gas project, the US has not shown any interest in going deep into Sui field in Balochistan and in exploitation of over a trillion cubic feet of tight gas in small pockets across the country at economical rates. America is known to have made technological advancement for tapping such difficult resources.

Pakistan had sought the US assistance for technical studies, surveys and latest production techniques to maximise domestic production of gas including from deep, shallow and tight horizons.

This makes easier for Islamabad to resist the US pressure against Iranian gas project. It would be in the best interest of Iran and Pakistan to stick to the 'peace pipeline' agreement, honour their mutual commitments and move swiftly to complete the multi-billion dollar project as early as possible.

The agreements entail first gas flows by end 2014 which could be advanced by one year if domestic gas companies - SNGPL and SSGCL - are engaged to construct about 750-kilometer of pipeline. More so, because they are well versed with the terrain, routes and other technical details inside their country's borders, given their vast existing pipeline network - one of the world's largest integrated transmission system.

The two companies have indicated to complete the pipeline in 36 months compared with estimates of minimum 48 months, presented by a consultant who had been engaged without a transparent process as required under the public procurement rules.

Simultaneously, the LNG import is the key to resolution of short-term energy needs. The prime minister has decided to go ahead with the contract finalised with 4Gas and GDF Suez for import of 3.5 million tons per annum (500 million cubic feet per day), on which a lot of time has been lost due to unnecessary litigations.

At the same time, the prime minister has agreed to allow other firms to bring in additional quantities of LNG. The benchmark prices agreed for contracted project would, however, need to be kept in mind to ensure that energy costs remain within affordable limits.

Officials estimate that the gas shortfall is likely to almost double to more than two billion cubic feet a day (BCFD) even if the liquefied natural gas (LNG) imports planned over the next few months materialise. The most important thing is to put all resources and efforts together to expedite and enhance domestic oil and gas production. The OGDCL, the PPL and others have been sitting on vast hydrocarbon resources for decades because of bureaucratic wrangling and security reasons, which should end, given the increasing energy shortages.

As of now, the gap between gas demand and supply stand at around one BCFD this year and the plan to import gas from Iran through a proposed pipeline would, at best, materialise in four to five years. The shortage of one BCFD this winter, would go up to 2.1 BCFD by next year. The demand and supply estimates suggest that the gas shortfalls would increase by more than 300 per cent to 6.5 BCFD by 2020.

The projections imply that while gas demand would maintain a steady increase over the next 10 years — from 4.8 BCFD now to 8.6 BCFD in 2020 — the supplies would register a further decline, from four BCFD this year to 2.11 BCFD by 2020. Over the next two years, however, the supplies would slightly increase by 0.5 BCFD because of LNG imports.

The estimates suggest the shortfalls would increase despite a projected gas import through the IPI pipeline in 2014 and LNG imports next year because of the decrease in domestic production. These estimates indicate that shortfalls would be even higher if taken at the historic 6.5 per cent growth rate rather than 4.5 per cent assumed earlier.

Many believe that the demand, supply and shortfall estimates were still conservative given the fact that these had been prepared keeping in mind the current downturn in economic activities. That would mean even higher reliance on imported fuels like diesel and furnace oil to meet electricity demand. The oil import bill last year stood at about $9.5 billion and is forecast to be around $11.6 billion this year. If the gas import pipeline is not completed, oil import bill could reach $15 billion in only two years.

In the recent past, the previous government had planned five major initiatives to meet energy requirements, including three gas import pipelines, Gwadar port as an energy hub and LNG import. There has been no progress on these three pipeline projects, while building energy facilities at Gwadar has remained a pipe dream chiefly because of security situation.