More gas!

The India-Iran pipeline is finally on its way to becoming a reality, despite many hitches on the way

Iftikhar Gilani Delhi

Despite objections from the US, the $ 7 billion gas pipeline from Iran is likely to become a reality.

In December, India separately hosted high-level delegations from Pakistan and Iran to discuss various aspects of the project: reserve certification and allo-cation, gas quantity and quality and system configuration.

The most significant development was that the countries agreed to move from a bilateral to tripartite framework of discussions to evolve a common agreement. The three countries, which till now had been meeting only bilaterally—India has held talks with Pakistan and Iran separately, and Pakistan with Iran separately—will now for the first time hold a trilateral meeting in early February 2006 in Tehran.

After many hiccups, apparently due to US pressures, observers are amazed at the rate which the three countries have expressed their renewed commitment to the gas pipeline. Nicholas Burns, a top official of the US State Department, had almost poured water over the India-Pakistan-Iran gas deal. According to him, India had assured the US that any plans to sign energy deals with Iran were "years away". But officials said talks to build the pipeline were progressing well. "We shall go ahead," said an official associated with the project. He further told Hardnews that the countries had taken note of the political situation, specially the recent statements of Russia and US on the project. Sources privy to the talks say it was actually the Russian statement expressing keenness to participate in the project and the likelihood of China being involved that most of the security issues and US threats became irrelevant.

"We have made significant progress. We hope to complete the project by 2010," Pakistan's Petroleum Secretary Ahmad Waqar told Hardnews soon after the conclusion the meeting of the India-Pakistan Joint Working Group (JWG) here recently. He said that they have discussed matters like pipeline routing, delivery points, transportation tariff, transit fee, capital and operation costs beside the issue of pipeline security both with India and Iran. "Most of the security concerns of India have been addressed," he added. Petroleum minister Mani Shankar Aiyar also told the Lok Sabha earlier that the progress on the gas pipeline project was satisfactory and there was no problem between India and Iran.

According to plans, India would draw 60 million standard cubic meters per day (mscmd) from the over 2,100-km pipeline project and ramp it up to 90 mscmd in next two or three years, while Pakistan would start with 30 mscmd and double its offtake by 2013. Iran has also identified certain blocks of gas in the gigantic South Pars field in the Persian Gulf, which would be dedicated to the proposed pipeline project. It has also agreed to international certification of reserves.

Negotiations on the mega pipeline began in 1994, but no headway had been made until last year because of Indo-Pak tensions and the project's massive cost.

The warming of ties between the two South Asian rivals has now resulted in a renewed focus on building the pipeline. For Iran, which holds the world's largest gas reserves after Russia, India is as important as the European market, which it hopes to access through a pipeline across Turkey.

In the new environment of improved Indo-Pakistan relations, India feels it can pull off the construction of the pipeline from Iran through Pakistan. Unless India taps new energy sources, given the rising international price of crude, it will be impossible to grow at the projected seven or eight per cent. The upshot is that India and Pakistan have reconciled themselves to a deal that would have been dismissed as impossible even a couple of years ago. The US stand vis-a-vis India has been that it will assist India's long-term energy needs if New Delhi forgoes the proposed gas pipeline.

While India does not want to annoy the US, the Iran gas pipeline appears to be heading for completion.