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Globe & Mail: Pakistan set to build Iran pipeline: Will push ahead even without India

KHALID QAYUM
Bloomberg News

ISLAMABAD — Pakistan says it will proceed with plans to build a gas pipeline from Iran even if India pulls out of the project, because South Asia’s second-biggest economy expects its energy needs to more than double by 2020, Prime Minister Shaukat Aziz says.

“Pakistan is committed to the Iran gas pipeline,” Mr. Aziz said in Islamabad yesterday at the opening of the third annual Pakistan Oil & Gas Conference that aims to solve energy needs in the South Asian country. “We have enough investors in Pakistan to build the infrastructure for gas import.”

Pakistan plans to build the $7.4-billion (U.S.) pipeline from Iran to boost its supply of natural gas, which is expected to fall short of requirements by 2010, and also hopes to get transit fees for supplying to India. Pakistan needs to boost its energy supplies to support growth in its economy, which according to Mr. Aziz is expected to expand at an annual rate of as much as 8 per cent in the next five years.

The Pakistan-Iran-India “Peace Pipeline,” is “the most logical, most cost-effective” pipeline, Martin Trachsel, vice-president with Royal Dutch Shell PLC, said in his speech at the conference.

Pakistan is in talks separately with Iran and Turkmenistan to import gas through the proposed construction of pipelines to meet local demand.

Pakistan, Iran and India are close to an agreement on the pricing and volume of gas to be imported from Iran, Mr. Aziz said. The three countries are currently negotiating a gas pricing formula before seeking funding for the project.

“We will collect the gas at our border and take care of it through our own infrastructure,” Mr. Aziz said.

The pipeline from Iran, first proposed a decade ago, was initially stalled by hostile relations between India and Pakistan, which have fought three wars over the disputed region of Kashmir since independence from Britain in 1947.

And in the past year, the United States has pressured Pakistan and India to abandon the pipeline as part of a plan to isolate Iran for its nuclear program.

Pakistan’s energy needs are likely to more than double to 177 million tons of oil equivalent from 58 million tons today, Mr. Aziz said.

The South Asian nation plans to increase its domestic production of oil to 100,000 barrels a day from 66,000 barrels a day, he said, without providing a time period. Pakistan’s production of oil meets 21 per cent of its domestic needs.

The country will also increase its production of natural gas to five billion cubic feet a day, Mr. Aziz said. The Islamic nation produces 3.8 billion cubic feet of natural gas a day, which meets present demand, but will fall short by 2010 after companies such as power producers switch to gas from oil to cut costs.

“The energy needs of Pakistan are rising sharply on the back of increased economic activity and growth,” Mr. Aziz said. “We need to ensure our energy supplies keep pace and we are making a lot of effort to develop our energy security.”

Pakistan’s economy is forecast by the government to expand 7 per cent in the year that began July 1, from 6.6 per cent a year ago. The country’s energy demand is set to rise by as much as 10 per cent a year, Mr. Aziz said.

Pakistan plans to increase its number of exploratory wells to 100 from 21 built in 2006, he said.

Pakistan’s new oil and gas policy will be prepared within the next 30 days, Mr. Aziz said.

It will be based on “deregulation, liberalization, a strong regulatory agenda for the government and the private sector taking care of all commercial activities,” he said.

The government is seeking, through this conference, proposals by explorers to revise incentives in the five-year petroleum policy that ended last year.

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