Ministry wants IPI gas only for power generation: Iran showed no flexibility on pricing

ISLAMABAD (March 17 2009): The Petroleum Ministry is sending a proposal to the Economic Co-ordination Committee (ECC) of the Cabinet to import Iran gas only for power generation purpose, under Iran-Pakistan-India (IPI) gas pipeline project, as Iran has refused to scale down the price from 78 percent to 70 percent of crude oil. Sources told Business Recorder that, during President Asif Ali Zaradris visit to Iran on March 10, Iran did not show any flexibility in its offered gas price to link to 78 percent of global crude oil. Pakistan had offered the price of 70 percent global crude oil. The Petroleum Ministry summary, to be tabled in the next meeting of the ECC, will recommend import of Iranian gas only for power generation, and not for domestic, commercial and industrial consumers, due to its high cost. Sources said that gas from Iran for power generation would cost 8.8 cents/kwh, against 10 cents/kwh from furnace oil at $40 per barrel crude oil price. According to comparison based on $40 crude oil price, the cost of nuclear-based power generation is 4.1 cents/kwh, from Thar coal 8.8 cents, 9 cents from imported coal, and 12 cents/kwh from wind sources. At present, Sui Northern Gas Pipeline (SNGPL) is providing gas at Rs 299.39 per mmbtu, or $3.7 per mmbtu (valued at 80 rupees per dollar) and Sui Southern Gas Company (SSGC) at Rs 288.22 per mmbtu, or around $3.6 per mmbtu. However, if Pakistan signs accord linking gas price to 78 percent per mmbtu, its cost would be around $12 per mmbtu, or Rs 960 per mmbtu, which would be beyond the reach of domestic consumers. In the current scenario, Petroleum Ministry is going to propose gas to be imported from Iran, instead of furnace oil. According to an estimate, one billion cubic feet gas per day would generate 5,000 mw electricity that would result in relief regarding power shortage in the country. Sources said that recent studies had indicated that Iran gas is the most economical option for power generation, against alternative fuels like furnace oil, liquefied natural gas (LNG) and coal. The Additional 2,937 MW generation is required by 2015, and 11,691 MW by 2020. The 1.05 bcfd phase one of IPI can generate 5,000 MW electricity.