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TSI

New diplomacy in the pipeline

 

IPI is considered as the mother of all pipeline deals
SAURABH KUMAR SHAHI | Issue Dated: July 15, 2007
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New diplomacy in the pipeline It looks as if ‘Gas Pipelines’ have become the new tool for Track II Diplomacy in the world. It is evident by the series of pipeline deals that have been inked this year by countries that have long remained at loggerheads. Be it Trans-Siberian and Central Asian-Baltic Pipeline deals by Russia or Myanmar-Indo-China Pipeline by China; pipelines have proven to be the perfect tool to break the diplomatic ice. And as thing stands; it looks as if India and Pakistan have taken a leaf or two out of this to mend their own fences as well. In what may not only completely change the energy equations but also affect the strategic ties as well, India and Pakistan appear to be moving forward on the Iran-Pakistan-India (IPI) pipeline deal. The proposed pipeline would initially carry 60 million cubic metres of gas daily to Pakistan and India; half for each country that would be raised to 150 million cubic metres at a later date. Under the agreement, Pakistan will be paid a transportation tariff of $0.70-0.75 per million British thermal units (mBtu) of gas, which is higher than the $0.55 per mBtu ($20 million annually) that New Delhi had been willing to pay earlier. Speaking to TSI, Ahmad Waqar, Petroleum Secretary of Pakistan said: “It is a segmented project, we have estimated the cost of laying the pipeline from Iran point to India at US $2.5bn to US $2.75bn at current prices.” Replying to a question related to the security guarantee given by Pakistan, he added, “Pakistan was committed to the pipeline’s security as two-thirds of it would carry gas for internal use and 240 km utilised to transport gas to India.” Meanwhile, Iran has invited Prime Minister Manmohan Singh and Pakistan President Pervez Musharraf to Tehran for signing the mega gas deal.

Although it is being pegged as the mother of all pipeline deals, it has its own shares of hurdles as well. While the initial gas price has been agreed upon by the three contracting parties, there is no agreement on how frequently the price is to be revised. Dr. Cleveland, a noted oil expert, told TSI: “Iran wants the pricing formula to be revised every three years based on global fuel prices, whereas both India and Pakistan, however, want the price to be constant for the 25-year duration of the gas supply contract. This might jeopardise the deal completely.”
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Issue Dated: Feb 5, 2017