Iran- Pakistan – India Pipeline:

Reality in Dream
Girijesh Pant
Jawaharlal Nehru University
India

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 IPI
Cross Border-Transnational Project
Drivers
• Energy Security.
• Peace Dividend.
• Strategic returns.
Barriers
• Indo- Pak Hostility.
• Iran Under Sanction.
• Strategic Constraints.
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 In retrospect:
• IPI passed through three phases:
• Phase One: Energy security & Indo Pak
differences.
• Phase Two: Energy Security and Peace
dividend.
• Phase Three: Strategic returns/constraints
and energy security.
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 IPI Gains Strategic Salience
• US West Asia Policy: Focus Iran.
• All the three regional players have
defined relations with America
• Iran and USA –Hostile
• Pak-USA—Restoration of parity.
• India– USA ---Buoyant.

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 IPI: In the Strategic chess board
• All the three regional players factor IPI in their
relations with USA.
• Iran promotes it to undermine US objective in the
region.
• Pakistan finds in opportunity to underline its
significance in the region.
• India of late realized its potential in its emerging
relationship with USA.
• USA sees it detrimental to its policy objectives in the
region.
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 The Story Line:
Idea was first tossed in1989.
India –Iran MOU in 1993.
Indian Cabinet approved the of the project in
2005.

Technically feasible & economically win-

win with huge Confidence Building
dividend.
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Recap: India Iran to IPI Pipeline:
• Bilateral Project with three options:
• Land route : High Security Risk
• The sea route: Highly Expensive
• Shallow water of Pakistan.

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 The Bumpy road: 1989-2003
• Indian Concerns: Pak hostility.

• Pakistan Concern : Indian hegemony.

• Iranian Concern: search for market. And

busting sanctions.
• Breakthrough : The BHP Billiton Report
in 2003
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The BHP Billiton Report in 2003
Summary

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 Project: Profile
• The 2775-km land pipeline will connect Asslauyah fields
in Iran via Balochistan.
• In Indian border it will reach to Barmer, Rajasthan.
• Initial cost was $4 billion . In 2007- it is approx $ 7.4
billion.
• Total quantity of gas shall be 150 MMSCMD, of which
60 MMSCMD shall be supplied in the initial phase which
will be equally divided as 30 MMSCMD to each Pakistan
and India.
• The year 2011 is the timeline for commencement of
supply.
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 Some Vital Parameters
• India and Pakistan are to sign separate gas purchase
agreements with Iran and take deliveries of gas at Iran-
Pakistan border.
• India will separately enter into an agreement with Pakistan
for transporting gas through its territory.
• The pipeline would be laid in the three nations separately.
Iran would lay a 1,100-km pipeline to the Iran-Pakistan
border.
• Pakistan would lay a 1,035 km from its border with Iran to
the Indian border.
• India would then pipe the gas to consumption centers.
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 The negotiations.

• Seven tripartite meetings have held.

• India participated in six trilateral meetings.
• Skipped last meeting held in Tehran in Sept
2007.

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 Issues on table
Security Price & Transit fee,
• Security: Pakistani Assurance.

• Out of total 1000 km of pipeline, the 750

km portion will carry gas for both Pakistan
and India and only 240 km pipeline shall
carry the gas required by India.

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 Pricing Question

• In 2005 Iranian proposal was agreed upon to fix price

at $4.93 per mbtu (million British thermal unit) at oil
price $60 per barrel and to remain the basis of pricing
of gas for the entire 25-years of contract.
• Iran seeking modification : envisaging revision in the
formula every three years, based on international fuel
prices and energy mix.
• Pakistan wants to add a transit fee (10% of the gas
price) and a transportation tariff, making the delivered
price of gas at the India-Pakistan border $7 per mBtu.

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 Transport & Transit fee

• Pakistan position transit fee (10% of the gas price)

• Indian position: transit fees of 15 cents per mBtu. No
transport as the pipeline is a joint project and about
half of it will be common to both countries.
• Pakistan has revised demand is $1.57 perm Btu to
$0.70-$0.75 per mBtu as transportation tariff.
• India ready to pay not more than $0.55 per mBtu
($220 million annually).
• On transit fee, Islamabad is seeking $0.493 per mBtu
while New Delhi has offered $0.20 per mBtu.
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 Progress :
some mile stones
• Differences are narrowing down extending to China as Pan
Asia Pipeline.
• Pakistan offered to buy 60 mmscmd from Iran, use half of it
in Pakistan and sell the rest to India at the India-Pakistan
border. To circumvent India's need to deal with Iran.
• Pakistan said that it will initiate bilaterally.
• On the Iranian part, 18 percent of the physical job has been
completed
• Tehran voices impatience with Delhi over pipeline delays.
 

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Prospective reality –
Never ending dream

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 Viewed From Tehran
• Triple win economic, political, and strategic
Project
• Energy is vital component of Iranian foreign
policy.
• Iranian regime intends to make maximalist gains.
• Iranian East ward energy moves are largely driven
by difficulties in western market.
• Europe is Iran’s preferred option: Turkey Route.
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 The Strength
• The rich volume.
• The strategic location.
• The New Geopolitics of Gas: the rise of Gas
opec

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 The Weakness
• Gas industry yet to develop.
• Foreign investment.
• Impact of sanctions on prospective
engagement.

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 The Trajectory: three Scenarios

• Scenario One: Grand Bargain

• Scenario Two: Confrontation
• Scenario Three: Stalemate

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 the Grand Bargain
• Iranian Gas would be moving to Europe.
• In short run Iranian gas export to Asia
would be not significant though in medium
term prospects are better..
• IPI would loose its strategic salience and
would be dictated more by market
economics.

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 Scenario Two: Confrontation
• Iran pursues more aggressive Energy
diplomacy, better terms to Asia.
• Asia cannot make much gains due to
Sanctions.
• IPI would remain in limbo.

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 Scenario Three: The Stalemate
• Energy will be high on Iran foreign policy
agenda.
• Asia will be offered carrot and stick
options.
• IPI will be kept alive project but the
progress will be determined by foreign
policy matrix of all the three stake holders.

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 IPI in Indian Energy Matrix
• The three leading questions:

1. How much gas India needs from Iran and

how much Iran can offer and how reliable
it would be?
2. At What price?
3. What is the time schedule of the project?
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 Significance of Iranian gas!
• Indian Domestic Supply: 170 mmscmd
• Import : 80.00mmscmd
• Total supply: 250mmscmd
• Adding:18(Iran)LNG)+9(EnnoreMysore)+60(IPI)
+40(TAPI)=127mmscd.
• Grand Supply =250+127=377mmscd
• Estimated Demand=263 to 314mmscd
• Surplus:377-314=63 Iran supply is 60+18=78 or
30+18=48
• Iran IPI gas:15.9 of supply.
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 Iranian Capacity to Supply IPI &
Nabucco pipelines
• “Iran does not have the gas available to meet
demand from two of its major export initiatives,
the IPI pipeline to India and the Nabucco pipeline
to Europe, unless buyers reduce the volumes
demanded.”
• Hadi Nejad Hosseinian, Iran's Deputy Oil Minister and long-standing gas
negotiator.
• Europe is asking for 100mn cu m of gas a day,
while India and Pakistan need 150mn cu m of
Iranian gas,

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Demand-Supply Gap
Source: DGHC, GOI

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Anticipated Production Profile
source DGHC

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Demand -Supply long term

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Demand-Supply long term

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 New Findings:
India Under explored not Under endowed
• Domestic gas consumption, to go up from 115
mmscmd in 2007 to 309 mmscmd by 2012.
• Supply of gas from Reliance, ONGC and GSPC
alone will be more than 200 mmscmd.
• Add to this the new LNG capacity of Petronet at
Dahej and Kochi, and supply is likely to outstrip
demand.

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 IPI in Indian Foreign Policy
matrix
Emerging India is revisiting its global and
regional engagement.
The new economy is redefining its global and
regional stakes.
The disjuncture between new economy and
the polity however is a restraining factor.

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 IPI in Ambivalence Indian
Foreign Policy
• GOI’s preference would be keep IPI as low
profile energy question kept in abeyance.
• Foreign policy is mediating its policy posture.e.g
Indian vote in IAEA
• US concerns do impinge on it.
• Progress on Indo-US Nuclear deal will bearing on
the Indian ambivalence.

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 Essar abandons Iranian refinery
plans
2 November 2007
The Essar Group has abandoned plans to develop a
new oil refinery in Iran that would violate US
sanctions on Tehran, Minnesota governor Tim
Pawlenty said.
The move came after Pawlenty flew to India to discuss
Essar's Iran work and potential conflicts with US
law.
• Essar, which recently bought a Minnesota steel
company.
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 Indian Apprehensions
Economic decision making in Iran is highly
politicized.

Indian Democratic Polity too has bearing.

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 India bitter on LNG Deal

• Iran is not willing to supply the LNG at the

contracted price of $3.215 per million
British thermal units.
• In June 2005, when the LNG deal was
inked, the price of crude oil was $31 a
barrel. Iran now is pressing for a price of
$4.78 per mBtu.

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 The Prognosis
• India will not kill the project but is neither
desperate.
• Given the emerging geopolitics of energy, in
particular the hydrocarbons, India has wider stakes
than country specific.
• It is augmenting sourcing from other suppliers like
Qatar, Bangladesh, Vietnam, Yemen possibly Saudi
Arabia and Russia.

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