China’s President Xi Jinping has arrived in Pakistan, and is expected to announce a $46 billion-investment package for a roads, railway, and pipelines project between two the countries.
The Wall Street Journal reported earlier that China will build a 2-billion worth pipeline to bring natural gas from Iran to Pakistan to help address Pakistan’s acute energy shortage during Xi Jinping’s visit to Islamabad.
During Mahmoud Ahmadinejad’s presidency, Iran and Pakistan sealed a gas agreement that enables Iran to export 22 million cubic meters per day (bcm/d) of natural gas to Pakistan initially from January 2015.
However, Iranian has not yet completed, nor Pakistan started the construction of the pipeline on its own soil due to financial problems.
Iranian officials had said that Islamabad should pay $200 million compensate monthly for delaying the commencement of the pipeline, but regarding earlier negotiations, Pakistan promised to spur the pipeline project soon.
Alongside Iran, some other gas suppliers are keen to deliver their fuel recourses to Pakistan. Turkmenistan has negotiated with Pakistan as well as Afghanistan and India to realize the TAPI pipeline to export about 33 billion cubic meters of gas to these countries.
On the other hand, Pakistan purchases Qatari LNG and Moscow-Islamabad have finalized an agreement on April 18 under which Russia will lend Pakistan $2 billion to lay a pipeline that will transport liquefied natural gas (LNG).
Pakistan suffers from gas shortage, especially in the power generation sector, but in long term, it also wants to become a gas hub in the region, transferring natural gas to India and China.
For Russia, getting a ride on Turkmenistan’s gas delivery potential towards Europe is vital, while China plans to boost its economic influence in Central and South Asia.
Iran currently produces 660 mcm per day (mcm/d) of gas, while this figure is expected to increase to 760 mcm in next spring and reach 1,100 mcm/d in 2019. The country will have enough surplus gas to deliver to Pakistan in coming years, which potentially would divert Iran’s intention towards the eastern gas markets rather than Europe.
Currently, Turkmenistan is China’s biggest gas supplier. Ashgabad exported about 26 bcm/a of gas to China during 2014, but its gas delivery to Beijing increased by 47 percent in April compared to the same month last year.
China’s is expected to import about 40 bcm/a of Turkmen gas during the current year and this volume is projected to reach 65 bcm/a in coming years.
China is also Iran’s biggest trade partner, purchasing above 50 percent of Iran’s total oil export as well as sharing above 25 percent of Iran’s total non-oil exports and 19 percent in Iran’s total imports.
The construction of Peace Pipeline will create further opportunities for China to deepen its economic influence in Iran as well.
Dalga Khatinoglu is an expert on Iran’s energy sector,
head of Trend Agency’s Iran news service