Iran-Pakistan Pipeline Construction Suspended
Though no reason has been given, Iran has announced that construction of the Iran-Pakistan natural gas pipeline has been suspended and will tentatively be resumed in the spring. The pipeline is intended to stretch over 1,100 kilometers, beginning from Iran’s southern Assalouyeh Energy Zone and crossing over into Pakistan, with supplies to come from Iran’s South Pars gas field. Initial capacity was said to be estimated at 22 billion cubic meters per year.
According to expert Robert Cutler (also of GIR), writing for Asia Times (atimes.com), there has been skepticism about the feasibility of the deal from the onset, when the two sides signed an agreement in May 2010. Originally, the pipeline was to include India as well, but following a nuclear sharing agreement between India and the US in 2008, New Delhi backed out of the pipeline plans, having grown frustrated with Iranian negotiating tactics. The pipeline has been plagued by disagreements between the two sides, and particularly over the Pakistani route. Pakistan is also courting China, and an indication of Chinese interest in a pipeline in the area would trump the Iranian route plans, according to Cutler. Pakistan’s restive Balochistan region represents one possible route, but security remains a serious concern there.
EU Heralds Azeri Gas Talk Progress, Perhaps Prematurely
European Commission President Jose Manuel Barroso last week concluded a visit to the Azerbaijani capital Baku, where he said “major” progress had been achieved; however, Baku has not yet discussed volumes of natural gas with Europe, lending skepticism to Barroso’s optimism. In the meantime, the EU is also hoping to contrive a merger of the Nabucco pipeline and the smaller Iterconnector Turkey-Greece-Italy (ITGI) pipeline in an effort to ensure gas supplies from Azerbaijan. Azerbaijan is key to the initial gas supplies for the Nabucco pipeline. For now, Nabucco, ITGI and the Trans-Adriatic Pipeline (TAP) are competing for the first gas to come out of Azerbaijan’s Shah Deniz II field in June this year. The European Commission is pushing for Nabucco and ITGI to open talks about a merger in order to increase their chances of winning the Azeri gas supply.
Europe received more bad news this week when BP estimated that the cost of building the Nabucco pipeline would rise to around $19 billion due to the rise in the price of steel. Earlier estimates put the total at around $10.7 billion.
…While Russian South Stream Pipeline Shoots for 2015 Launch
Russian state-owned gas giant Gazprom says its South Stream pipeline should be up and running in 2015. The joint venture with Italian energy giant Eni SpA could also see another member join in later this year – French state-run Electricite de France SA. The South Stream pipeline will transport Russian and Caspian gas under the Black Sea, bypassing Ukraine en route to Europe. The EU is seeking to lessen its dependence on Russian gas through the alternative Nabucco pipeline.
Iraqi Oil Exports Increase Thanks to Kurdish Crude Flow
Dow Jones on 18 February reported a rise in Iraqi oil exports to the highest level since 2003, at over 2.16 million barrels a day for February so far. This is due to a steady increase on crude oil from the country’s Kurdish region. Exports from Iraqi Kurdistan resumed earlier this month, increasing from a starting point of 10,000 barrels a day, and they could reach 100,000 a day by the end of February, the report says. However, recent unrest in Iraqi Kurdistan’s two largest cities have sparked fears of instability that could affect oil output. (GIR will examine this further in Thursday’s Weekly Geopolitical Summary).