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Pakistan, Iran and India to go ahead with gas pipeline project

The three countries have now agreed to enter into trilateral discussions on the project from the very beginning to minimise negotiation time so that implementation of the project could start by April 2006. These sources said India was earlier suggesting three different sets of bilateral negotiations on the project but this was not found viable. Pakistan has already offered transit facility for transporting Iranian piped gas to India through its territory subject to a negotiable fee. This is the only issue where Pakistan has made an unbundled offer for negotiations without linking it to the progress on the issue of Jammu and Kashmir. Pakistan, the sources said, has conveyed to Iran and India that it was ready to enter into trilateral negotiations by October this year, although a final decision on a gas import option would be taken by December 2005. However, India has told Iran that it could start trilateral discussions on IPI project by November.

By that time, India is expecting a report from its consultant on the subject relating to transaction structure, related risks and risk mitigation measures, the sources said. On the basis of this report, India would also take a final decision whether or not to join the multi-billion dollar project, although it has already indicated its willingness to take part in any of the three pipeline options - from Iran, Qatar and Turkmenistan. The sources said India's priority is to be only a gas buyer without sharing any responsibility of the project execution but it was also ready to involve Indian companies to become part of the project consortium if such an option promised it any economic benefit. Pakistan, these sources said, has also agreed to allow Iran to keep the proprietorship of the overall project except the land in its territory that would be used for laying a pipeline for transiting Iranian gas to India.

The three countries have yet to decide whether to firm up separate consortia to develop 2670-km of gas pipeline in their respective territories or a joint consortium for the delivery of Iranian gas to India. A final decision on the question, these sources said, would be taken once the transaction structure developed further. The estimated $7.2 billion pipeline is to run about 1115-km in Iran, 705-km in Pakistan and 850-km in India. In Pakistan, Interstate Gas Company Limited (IGCL) which has been assigned the task of gas import pipelines was well placed to raise about $2 billion from the surplus liquidity available with the local banking sector against government guarantees.

India, the sources said, was now convinced that a gas import plan was a must for its western cities like Haryana, Delhi and up to Uttar Pardesh because transportation of liquefied natural gas from Qatar and Iran through its southern cities to western part was not economically feasible. For India's eastern side, the gas demand, they said, could be met through imports from Myanmar and GK basin and through LNG import for Southern parts.