Iran gas: China waits as India wavers

March 6, 2008 - 0:0

NEW DELHI (Asia Times Online) -- China is emerging as a potential partner in the proposed multi-billion dollar, 2,700-kilometer gas pipeline originally intended to link Iran, Pakistan, and India.

China, always on the lookout for new energy sources, has conveyed to Pakistan it would be willing to import 1.05 billion cubic feet (bcf) of gas per day if India opts out of the project, according to reports quoting officials in Islamabad.
Last month, a Pakistan Foreign Office spokesman said: ""If there are prospects of China joining the IPI project with or without India, we will welcome it. Pakistan is committed to the pipeline because of its desire to achieve energy security.""
In similar vein, an Iranian Foreign Ministry spokesperson said in Tehran, ""Other countries are eager for implementation of the
[IPI] project. China is putting pressure that she wants to join the project. We don't have a lot of time. It is time to expedite the decision-making.""
A gas purchase agreement has been finalized by Islamabad and Tehran that will be formally signed this month, while India has kept away from recent talks, citing various reasons, including political instability in Pakistan.
Speaking in Parliament recently, India's Petroleum Minister Murli Deora said, ""No official communication has been received regarding China joining the IPI gas pipeline project. Such multilateral projects involve protracted discussions as all the aspects have to be carefully examined.""
While Pakistan and Iran remain keen to move ahead with the project, it does seem that Tehran and perhaps even Islamabad would prefer India rather than China on board because China is unlikely to pay the kind of price that India would for the gas.
Iran's Foreign Ministry has denied reports that the tripartite talks over the IPI pipeline have collapsed. ""All three countries
[India, Iran, and Pakistan] believe that this project will provide stability and security to the region. There is a serious will and determination to realize this project,"" a statement recently said.
Over the past couple of years, India, Pakistan and Iran have mutually agreed to a price of US$4.93 per million British thermal units (mBtu), an industry measure, for the gas from Iran, which many observers feel is not the kind of money Beijing will settle for.
This price was negotiated when crude oil was $60 a barrel. It is now trading in the $100 a barrel range.
Iran, which possesses the world's second-largest gas reserves after Russia, has completed nearly 20% of the work on the pipeline, which will supply gas from the South Pars fields up to the Iran-Pakistan border. Pakistan is yet to begin work on a 1,000km stretch of the pipeline to link Iran with India.
In the event that China joins the project, the pipeline would run via Gilgit in Pakistan's Northern Areas, which is very difficult terrain. Pakistan, which has already approved a Karakoram highway project in the same location, is also looking to extend a railway link to China to connect with Gwadar port in Balochistan province, in the south.
New Delhi has been concerned about issues related to safety, commercial viability and security of the IPI pipeline and has thus been promoting involvement of independent monitors as well as the Russian firm Gazprom as an investor in the project.
The Indian position is eased in the short term by the fact that the Reliance Industries-managed Krishna-Godavari gas fields in the east of the country are set to be productive from this year, pointing to no acute gas shortages in the near future.
Over the longer term, however, India will need access to new energy resources to sustain its growing and modernizing economy.