Prospects of Pak-Iran Energy Cooperation

DESPITE geographical contiguity, availability of a well-defined communication network and Islamic brotherhood, the volume of bilateral trade between Pakistan and Iran is very low. This reduced volume of bilateral trade and commerce is being viewed in the complete disadvantage of both Islamabad and Tehran. Moreover, there are no serious reasons for not pursuing the bilateral trade activities. Critically analysing the potentials and prospects of bilateral trade, it reveals that there exists numerous areas where Pakistan and Iran can cooperate for the promotion of bilateral trade and commerce. For the past few years, Pakistan is facing serious shortages of energy especially the natural gas.

Owing to this shortage, Pakistan finds it impossible to provide needed gas and related energy to its industry and even to the domestic consumers. On its part, Iran has abundance oil and gas reserves which can be easily transported to Pakistan within shortest possible time and distance. There is already an agreement signed between both states for provision of Iranian gas to Pakistan. The agreement commonly known as Iran-Pakistan gas pipeline was formally signed in 2013 and still waiting for the implementation.

Tracing the history, the Iran-Pakistan 1880kms gas pipeline for the provision of natural gas from South Pars fields of Iran to Pakistan was initially negotiated between both countries in 1994. Later in 1999, India also desired to join the project thus it was renamed as Iran-Pakistan-India (IPI) gas pipeline. After its nuclear deal with United States, India decided to quit the project under US pressure as well as quoting the heavy price of the gas. After India left IPI, the projects become a bilateral venture of Iran and Pakistan (IP) gas pipeline. The estimated cost of the project was $7.5bn to carry 750 million cubic feet of natural gas per day from Iran to Pakistan.

As a result of the bilateral agreement, Iran completed its part of IP gas pipeline, whereas, Pakistan has still not completed its part of the IP. The unwarranted delay toward completion of IP gas pipeline has caused element of distrust between Islamabad and Tehran on one-hand and created energy crises within Pakistan on the other. There have been many justifications cited by successive governments of Pakistan for not completing the pipeline. The dominant pretexts given so far have been; the US pressure and the financial issues which acted as hurdles towards completion of IP gas pipeline.

The question arises why Pakistan should accept unjustified US pressure over the project of its national interests. Did US ever consult Pakistan over its projects or else the payments were to be made by Washington? Accepting such pressures is amounting to compromise on the national interests of Pakistan besides being an example of the bad governance. Pakistan must renegotiate with Iran over IP gas pipeline and through a bilateral understanding complete the project on priority before Iran decides otherwise. Moreover, the successive governments should not delay the projects which have been agreed upon by earlier government(s). Such trends cause huge losses to national economy and relationships with other countries.

It is added that upon its completion, IP gas pipeline will be an assured and secure energy project compare to Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. Despite Taliban’s take-over of Afghanistan, there is no surety of TAPI 1,814km trans-country natural gas pipeline running across four countries. Then, Kabul has always been hostile to Pakistan and the situation is likely to continue even under the Taliban rule as demonstrated in last few months. Except momentary distrust, Pakistan and Iran enjoyed an excellent relationship. There have been no hostility along Pak-Iran border and in the last one decade, the element of mistrust has been bridged to a greater extent. Moreover, after signing of a Memorandum of Understanding (MoU) between Iran and China for $400 billion Chinese investment in Iran over next 25 years, it is likely that the current deadlock over IP will be over and this pipeline may extend to China with new name; Iran-Pakistan-China (IPC) Pipeline.

It is worth mentioning that, Iran holds over 1,183 trillion cubic feet (Tcf) of proven gas reserves, making it world’s second highest in the gas reserves accounting for about 17% of the world's total natural gas reserves. Besides, Iran hold huge amount of crude oil. On its part, the energy demand of Pakistan has increased due to the rapid rise in population and for running its industrial and commercial sectors. Pakistan can meet maximum 75% from current domestic and imported resources; 50.4% from indigenous gas, 28.4% by oil (imported mostly) and 12.7% from hydroelectricity.  There is less attention towards oil and gas exploration in Pakistan, mainly because of the influence of multinational oil and companies and branches of their cartels within Pakistan. The already explored natural gas resources are constantly reducing, likely to worsen the situation in the coming years.

As a way forward, there is an immediate need that, Pakistan must concentrate towards its rapidly rising energy requirements. In this regard three aspects need serious and immediate attention: a) materialize its already agreed Iran-Pakistan (IP) gas pipeline with Iran, b) collaborate with Iran for the joint construction of at least two oil refineries at Pak-Iran border and Gwadar while updating the already established oil refineries in Pakistan, and c) undertake massive campaign of exploring the oil and gas resources within Pakistan to avoid exploitation at the hands of multinational oil and gas cartels.

The writer is Professor of Politics and IR at International Islamic University, Islamabad.