hydrabadi_arab
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Govt proposes a rate as low as $4.67/mmBtu against Iran's current $10.6 ask, undercutting even LNG costs
Pakistan has asked Iran to slash the price of gas supplied through the Iran-Pakistan (IP) pipeline project by up to 50% and has also sought a reduced volume under the project, as the two sides renegotiate a deal signed more than a decade ago, with Islamabad citing weak appetite across domestic sectors for energy at elevated prices, The Express Tribune reported.
Islamabad has said it could move forward with the project only if US President Donald Trump grants Iran a sanctions waiver. The government has drawn up a negotiation strategy with Tehran in anticipation of a possible US-Iran peace deal that could lift sanctions.
Officials have noted that the IP pipeline's current pricing exceeds even the cost of imported liquefied natural gas (LNG). Qatari LNG had previously drawn criticism for its high price, with no domestic sector willing to absorb it; weak demand eventually led Pakistan and Qatar to agree on diverting 24 LNG cargoes before the outbreak of the US-Iran war.
Separately, Pakistani oil and gas exploration firms have suffered multibillion-rupee losses after gas supplies from local fields were curtailed to make space for LNG imports.
Under the government's calculations, the prevailing IP gas price works out to $10.6/mmBtu, or Rs2,970, with an additional transportation cost from Hub to Nawabshah estimated at $1.25/mmBtu, or Rs350.
At Brent crude benchmarks of $60, $70 and $80 a barrel, the IP gas price had been calculated at $8.20, $9.40 and $10.60/mmBtu, respectively — compared with $7.14, $8.16 and $9.18/mmBtu for LNG supplied under Pakistan State Oil's (PSO) second sale-purchase agreement.
Islamabad has now countered with a formula pegged to Rs2,000/mmBtu, calculated at 6.11% of Brent plus $1. This would bring the IP gas price down to $4.67, $5.28 and $5.89/mmBtu across the same three Brent scenarios, undercutting LNG in every case.
The project's cost is estimated at $2.5 billion, with a planned capacity of 750 million cubic feet per day (mmcfd). Pakistan wants this volume reduced, citing limited room to absorb additional imported gas, particularly since PSO is already contractually bound to import LNG from Qatar and must consume it to avoid facing damage claims from Doha.
Pakistan and Iran signed an Inter-Governmental Framework Declaration on May 24, 2009, followed by a gas sale-purchase agreement on June 5, 2009, between Pakistan's Inter State Gas Systems and Iran's National Iranian Oil Company (NIOC). Pakistan's Ministry of Finance subsequently issued a sovereign guarantee in NIOC's favour.
The pipeline project has remained unimplemented for years due to US sanctions on Iran. Tehran subsequently pushed Pakistan into international arbitration, and the two sides are now seeking an amicable resolution.
Pakistan had earlier proposed that Iran either abandon the project or seek a waiver from the Trump administration.
Pakistan has asked Iran to slash the price of gas supplied through the Iran-Pakistan (IP) pipeline project by up to 50% and has also sought a reduced volume under the project, as the two sides renegotiate a deal signed more than a decade ago, with Islamabad citing weak appetite across domestic sectors for energy at elevated prices, The Express Tribune reported.
Islamabad has said it could move forward with the project only if US President Donald Trump grants Iran a sanctions waiver. The government has drawn up a negotiation strategy with Tehran in anticipation of a possible US-Iran peace deal that could lift sanctions.
Officials have noted that the IP pipeline's current pricing exceeds even the cost of imported liquefied natural gas (LNG). Qatari LNG had previously drawn criticism for its high price, with no domestic sector willing to absorb it; weak demand eventually led Pakistan and Qatar to agree on diverting 24 LNG cargoes before the outbreak of the US-Iran war.
Separately, Pakistani oil and gas exploration firms have suffered multibillion-rupee losses after gas supplies from local fields were curtailed to make space for LNG imports.
Under the government's calculations, the prevailing IP gas price works out to $10.6/mmBtu, or Rs2,970, with an additional transportation cost from Hub to Nawabshah estimated at $1.25/mmBtu, or Rs350.
At Brent crude benchmarks of $60, $70 and $80 a barrel, the IP gas price had been calculated at $8.20, $9.40 and $10.60/mmBtu, respectively — compared with $7.14, $8.16 and $9.18/mmBtu for LNG supplied under Pakistan State Oil's (PSO) second sale-purchase agreement.
Islamabad has now countered with a formula pegged to Rs2,000/mmBtu, calculated at 6.11% of Brent plus $1. This would bring the IP gas price down to $4.67, $5.28 and $5.89/mmBtu across the same three Brent scenarios, undercutting LNG in every case.
The project's cost is estimated at $2.5 billion, with a planned capacity of 750 million cubic feet per day (mmcfd). Pakistan wants this volume reduced, citing limited room to absorb additional imported gas, particularly since PSO is already contractually bound to import LNG from Qatar and must consume it to avoid facing damage claims from Doha.
Pakistan and Iran signed an Inter-Governmental Framework Declaration on May 24, 2009, followed by a gas sale-purchase agreement on June 5, 2009, between Pakistan's Inter State Gas Systems and Iran's National Iranian Oil Company (NIOC). Pakistan's Ministry of Finance subsequently issued a sovereign guarantee in NIOC's favour.
The pipeline project has remained unimplemented for years due to US sanctions on Iran. Tehran subsequently pushed Pakistan into international arbitration, and the two sides are now seeking an amicable resolution.
Pakistan had earlier proposed that Iran either abandon the project or seek a waiver from the Trump administration.
