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Aiyar on mission to open up energy corridor to Pakistan

NEW DELHI — Indian Petroleum Minister Mani Shankar Aiyar today embarks on the first concrete political and economic dialogue with Pakistan for opening up a corridor not only to source Iranian gas but possibly Central Asian energy supplies in the future.

The visit from June 4-8 is being seen by experts as the first step to explore not only the feasibility of a tri-nation gas pipeline from Iran to India via Pakistan, but also the possibility of cooperation in oil and gas, including investment and trade opportunities.

"This is the first ever in-depth dialogue with each side feeling out each other," a senior petroleum ministry official said.

After years of distrust, the dialogue is also seen as a positive move in bilateral relations between India and Pakistan, an outcome of the visit by Pakistan President Pervez Musharraf to New Delhi in April.

"The engagement is basically political. We have already had three round of talks with the Iranians, with considerable progress. But as the pipeline project is a tri-nation project, we need to engage with the third party," the official said.

On the political front is India's keenness to know the extent of Pakistan's commitment and the time line they see for the execution of the project. With the US having reservations over the project, India is keen to know Pakistan's response.

India is also keen to have an over-arching agreement between the three countries to provide a "political mandate to the project".

The issue of security still surrounds the estimated $5 billion gas pipeline project, mooted around 15 years back, alongside the commercial viability even if technical issues can be resolved.

"On the commercial front the crucial issues is to find out what Pakistan is thinking in terms of transit fee as also the cost of security, as the pipeline would pass through some geographically inhospitable territory," the official said.

The geopolitical situation in part of the terrain in Iran and Pakistan through which the pipeline is expected to cross is also causing some concerns, particularly due to the hostility of the local communities. All these will make the cost of security high and uncertain, feel the experts.

"It (the talks) is a good development. The gas pipeline from Iran is not the only one at stake but also other pipelines from Central Asia," said Saumitra Chaudhury, economic advisor with leading rating agency ICRA Ltd and also a member of the prime minister's economic advisory council.

At the same time, unresolved issues need to be focused on with regards the pipeline project, feels Chaudhury.

“The economics liquefied natural gas (LNG) vis-à-vis the pipeline is still not clear. The LNG option offers lots of advantages as with volumes rising the costs tend to come down," Chaudhury told IANS.

On Pakistan's response depends not just the proposed gas pipeline from Iran but also future plans of sourcing energy supplies from Central Asian countries.

Aiyar is slated to explore the opportunities in this direction during his visit to Azerbaijan prior to proceeding to Iran via the Caspian Sea route for signing the agreement for import of 7.5 million tonnes of LNG.

Preety Bhandari, director of policy analysis division of the think-tank The Energy and Resources Institute, feels despite the drawbacks the India-Pakistan dialogue on energy cooperation is a step in the right direction.

"It is an idea whose time has come. Not only India and Pakistan but other South Asian countries also need to look in the same direction whether gas, hydropower or other energy fuels," said Bhandari.

She felt that while there are many detractors waiting to derail the peace and economic cooperation moves between India and Pakistan, "it is up to the leadership of both countries to ensure the process remains on track".

A breakthrough in the bilateral talks is expected not only to pave the way for the pipeline gas but also flow of Indian petroleum goods and petrochemicals across the border. It may also open opportunity for joint ventures and investments, which has not been getting the right response despite efforts of companies like Reliance Industries.