The Cabinet is likely to approve import of 500-750 mmcfd gas from Iran at the rate of 80 percent of crude oil price, in its meeting scheduled for Wednesday (April 8). Sources told Business Recorder that the Petroleum Ministry will move a summary to the Cabinet to approve 500-750 mmcfd gas from Iran at the rate of 80 percent of crude oil price.
Sources are of the view that after approval of the Cabinet, the proposed gas import plan may be tabled in the Parliament for discussion. The Economic Co-ordination Committee (ECC) of the Cabinet had proposed to import 500-mmcfd gas from Iran instead of one billion cubic feet gas per day due to higher price demanded by Iran. Iran had earlier demanded gas price linking to 78 percent of crude oil but now it was demanding 80 percent of crude oil.
In January 2007, Pakistan and Iran agreed on a gas price formula at 45 percent of crude oil. However, in September 2008, Iran informed Pakistan that its parliament did not approve the agreed gas price formula and accordingly proposed a revised gas price formula to link gas price to 85 percent of crude oil.
Later it scaled down its demand from 85 to 78 percent of crude oil but now it is demanding 80 percent of crude oil. When contacted, advisor to Prime Minister on Petroleum and Natural Resources, Dr Asim Hussain said that raw gas should not be used by households.
He said that countries such as Saudi Arabia and Qatar were using the Liquefied Petroleum Gas (LPG) for households and the same practice should be followed in Pakistan. He said that burning raw gas is like burning wood and it should be used for power generation, textile and fertiliser sector. He said that cheaper electricity could be an option to provide to households.
He said that use of gas for fertiliser, textile and power sector may boost the economy of the country. According to sources, the Petroleum Ministry wants to use Iranian imported gas for power generation only. It also wants separate tariff for industry that would use the Iranian imported gas due to its higher price.
If the two countries agreed to gas price of 80 percent of crude oil, Pakistan will have to spend $1.5 billion foreign exchange annually for one bcfd if the price remains at $5 per million British thermal unit (mmbtu) valuing it on $50 per barrel crude oil. The consumers will have to pay additional 17.5 percent return on the assets also that will further escalate the cost of the gas price.