Pakistan and Iran are expected to sign gas sales purchase agreement (GSPA) on Iran-Pakistan-India (IPI) gas pipeline project after conclusion of talks to be held in Tehran on May 23-25. According to the sources, a delegation, led by Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain, will leave for Iran on May 22 to hold talks on IPI gas pipeline project.
The issue of gas price between the two countries has been settled as Pakistan is ready to import 750 million cubic feet gas per day at the rate of 80 percent of international crude oil price and the Federal Cabinet has accorded approval to the import the said volume of gas.
The two countries had so far failed to sign the GSPA due to differences over the gas price and now the two countries are close to signing the deal with Pakistan's acceptance of the price on offer.
Pakistan had scaled down its demand from over one billion cubic feet to 750 MCFD due to higher price sought by Iran. Iran had earlier offered a price of 78 percent of international crude oil price, but in September 2008, Iran informed Pakistan that its parliament had not approved the agreed gas price formula; and, accordingly, proposed a price of 85 percent of international crude. Later, it scaled down its offer from 85 to 78 percent of crude oil, but then again revised it upward to 80 percent of crude oil.
The Federal Cabinet had authorised the Petroleum Ministry to sign the GSPA at gas price of 80 percent of crude oil in international market. Now the officials in Petroleum Ministry are expecting that the two countries would sign the deal during the upcoming talks in Tehran.
Pakistan will import gas from Iran for power generation units through the public sector gas utility companies under the administrative control of the Petroleum Ministry. A separate tariff is expected for those industrial consumers, who would use imported gas.
After detailed analysis, the Petroleum Ministry reached the conclusion that imported gas at Iran's offered price was the most economical option to provide fuel for power generation as compared to other fuels such as furnace oil, LNG and imported coal.
According to an analysis, imported Iranian gas will result in annual saving of one billion dollars over import of furnace oil, (at crude oil price of 50 dollars per barrel). Similarly, there will be an annual saving of 735 million dollars if equivalent quantity of LNG is imported. The savings will increase in line with the hike in global crude oil price.