Modern economies depend on energy and the limited supplies of oil and gas have seen a huge increase in prices. Both India and Pakistan face the problem of insufficient natural gas to meet the increasing domestic demand for energy.
All the gas production in South Asia is currently used to meet the domestic needs. Natural gas is used to supply the new power plants, in an attempt to diversify from expensive oil imports. The result is an increase in the natural gas usage over the last decade.
Iran on the other hand has abundant gas resources, especially with the natural gas reserves that have been discovered in Iran’s South Pars fields in 1988. Ever since then, the Iranian government has been trying to increase its gas exports abroad. Iran understands the potential of high profits from gas-hungry countries in South Asia, such as India and Pakistan.
More than a decade ago, in 1995, Iran and Pakistan have signed an agreement for constructing a natural gas pipeline from Iran’s South Pars gas fields to Karachi, which is Pakistan’s main industrial port. Later, Iran came up with the proposal of extending the pipeline to India. However, the Indian government was not keen on entering into an agreement with Pakistan, owing to the tense relationship between the two countries. India came up with an alternative plan, suggesting the creation of a deep sea pipeline, to avoid any threat to security of resources. All that was in the past.
The potential for developmental and economic gain from natural gas ultimately forced Iran, Pakistan and India to reassess the situation. With relations between India and Pakistan improving and compromise on the pricing structure by Iran, this pipedream is turning into reality.
This project can prove to be vital for all three countries. It will give Iran a chance to gain entry into one of the biggest markets for energy resources, while India and Pakistan, with their fast growing economies will have sufficient long-term supplies to meet the increasing domestic demands.
Iran, Pakistan and India are expected to sign a deal soon, for building a 1,724 mile long natural gas pipeline that would carry 2120 million cubic feet of gas per day initially. The pipeline will run from Iran to Pakistan and then to India. Although, initially the project was estimated to cost $4.5 billion, the cost has been revised and finalized at $7.5 billion.
This is called the IPI pipeline or the “peace pipeline,” based on the perceived impact on it could have on reducing tensions between India and Pakistan.
This pipeline would begin in Iran’s South Pars gas fields and run through Baluchistan (Pakistan,) into India.
Although, everything else has been finalized, the only issue that is still being discussed is the delivery point. While Iran wanted to deliver it on the Iran Pakistan border, India wants it on the border of India and Pakistan. These issues are currently being sorted out and continuous talks are on between the officials of all three countries, and the formal agreement is expected to be signed towards the end of the month.
This agreement thwarts U.S. plans to isolate Iran from the world. U.S. allies, Pakistan and India are both under pressure from the United States not to get into any kind of agreement with Iran. In a statement made by Condoleeza Rice, she says “The United States has made very clear to India that we have concerns about their relationship with Iran.” These concerns are said to include the proposed gas pipeline.
Although, India was noncommittal initially, which was felt to be due to American pressure, the rising prices of gas and the immediate need for energy seems to have overcome all other concerns. Another factor that could have jostled India was the China threat, when China showed interest into entering the deal in place of India.
Experts say that it is only now that Pakistan and India are beginning to understand the dynamics of global energy politics. Now, with China also entering into the energy game, the energy resources of Central Asia would keep reducing with every pipeline that is built away from them. Unlike oil, which can easily be transported in any direction in containers, gas has to be transported only through pipeline routes. Only consumers on that route can be served and there is nothing that can be done to change this. These two countries now realize that continuing to hesitate would be detrimental to their countries’ health, with the West and the Orient ready to take most of the natural gas.
