Improving India?s trade ties with Islamabad has been a case of one-step-forward-two-steps-back. While Pakistan is yet to give the promised most-favoured nation benefit to New Delhi, the latter has skipped talks on the 2,700-km Iran-Pakistan-India gas pipeline despite its obvious economic gains. But that won?t prevent public sector GAIL India from selling a portion of imported LNG to industrial consumers in Lahore.
According to Prabhat Singh, director marketing at GAIL, the company is in talks with the Pakistani government to supply LNG to the gas-starved neighbour. The two sides are negotiating a five-year contract for supplying 5 million standard cubic metres per day (mmscmd) of gas to consumers in Pakistan. This makes business sense for the public sector gas marketer because it has long-term LNG import contracts with firms in US, Russia, Australia and Qatar. Also, the LNG is received at its Dabhol terminal can be re-gassified there and transported cost-effectively to Lahore units by connecting its Dadri Bawana Nangal (DBN) pipeline with them.
?We already have the DBN pipeline quite close to Amritsar. From Amritsar, the Pakistan border is hardly 25-30 km and from there, Lahore is not too far,? Singh said. He said the proposed pipeline is a win-win situation for both sides. For GAIL, the gas supply to Pakistan could increase utlisation levels of the pipeline which currently stands at about 5-10% for the lack of readiness of many Indian consumers to lift gas.
The DBN pipeline has a capacity of 31 mmsmcmd, of which only 2-3 mmscmd is being utilised as some power plants ans SEZ projects in adjoining areas have failed to take off.
Pakistan currently has considerable dependency on gas, which accounts for about 32% of the country?s energy mix.
It will just have to build a 30-km pipeline from Lahore to the border to flow the gas into the pipeline network of Sui Northern Gas Pipelines. For Pakistan, it offers an opportunity to import gas cheaper than its current imports which stands at $ 28/mmBtu, said Singh. He added that GAIL is seeking a price of $22 mmBtu, while Pakistan is seeking a lower price at around $18 mmBtu. ?Also they are seeking some tax exemptions,? said Singh.
GAIL is confident of selling gas to Pakistan at prices less than what it currently pays as the PSU has locked in lower-priced shale gas resources and is also currently negotiating future contracts at lower prices.
?We are negotiating for lower prices on existing contracts like the Gorgon gas from Australia. Also, for all future contracts, we are seeking prices $2-3 less than what we previously paid,? Singh said. The shale gas boom in the US and lower Henry Hub prices has enabled major gas consumers like India, South Korea and Japan to seek lower prices.
Sources said negotiations with Pakistan are being held at the top levels with oil ministry officials from both sides part of discussions. The recent elections in Pakistan had slowed things a little but now, things have warmed up. A team from India visited Pakistan 10 days back, which included senior level people from the ministry. The Pakistani oil minister and secretary level officials have been visiting India regularly as well.
The idea of the gas pipeline was first mooted during the Asian Summit of Gas Buyers held in March last year when a delegation from Pakistan visited India. With the proposed TAPI gas pipeline that will pass into India through Pakistan now showing signs of revival, GAIL?s pipeline could lead to a kind of mutual dependence on both sides, analysts said. This will bode well for diplomatic relations between the 2 sides as well.
Pakistan?s gas consumption in 2012 stood at around 55-59 billion cubic metres annually (bcma) against a domestic gas availability of 40 bcma. Pakistan used to be self sufficient in gas till 2005, but increased gas demand due to lack of alternatives and price subsidies coupled with diminishing production have impacted domestic gas supplies.
