ENERGY-SOUTH ASIA: Gas Pipelines to India Not Pipe Dreams

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, Jun 8 2004 (IPS) - Growing energy demands and the more open attitude of India’s new government toward its neighbours may see the revival of plans to pipe natural gas into the country from Iran to the west and Burma in the east.

Already, there are positive signs of cooperation from India’s immediate neighbours, Pakistan and Bangladesh – through which countries the proposed pipelines must traverse.

Even better, there is a stated willingness to help enlarge economic cooperation in South Asia – and Indian Foreign Minister Natwar Singh says that for New Delhi, the pipelines are an important component of this part of this cooperation.

In an interview with the ‘India Today’ weekly published in its Jun. 14 issue, Foreign Minister Singh said: ”We are willing to consider the Iran-India gas pipeline if Pakistan provides us with international security guarantees.”

Pakistan, which stands to earn 500 million U.S. dollars annually in transit fees for the proposed 707 kilometres of its territory over which the pipeline would pass, has been eager to participate in the project.

A memorandum of understanding was first signed on this between New Delhi and Tehran in 1993.

However, since that year, relations between India and Pakistan have resembled a roller coaster ride. The two countries – which have a 55-year-old dispute over the territory of Kashmir – came perilously close to an all-out war in 2002.

Thus, an alternative favoured by Jaswant Singh, who served first as foreign minister and then as finance minister in the Bharatiya Janata Party (BJP)-led government that was ousted in the April and May elections, was to build an undersea pipeline not between India and Pakistan but between India and Iran.

But in January this year, India and Pakistan committed themselves to a ”composite dialogue” with focus on improving trade and commercial relations, thereby increasing prospects for the pipeline once again.

Significantly, Mani Shankar Aiyar, a key leader of the Congress Party that leads India’s central government and is responsible for the signing of the 1993 accord with Iran, now holds the petroleum ministry portfolio in the cabinet of Prime Minister Manmohan Singh.

Aiyar, a career diplomat in the Indian foreign service before he took to politics, has served in the Indian High Commission in Pakistan and is a keen supporter of improved bilateral relations between the South Asian neighbours.

India’s plans to import gas from Burma to the east are even more complicated since the pipeline must pass through Bangladesh – itself a potential supplier – but this plan would be restrained by considerations of domestic politics.

Unocal, the U.S.-based energy giant that wants to export gas from its fields in Bibiyana in Bangladesh to India, has been refused permission to do so in spite of being assured earnings of 3.5 billion U.S. dollars over the next 20 years.

India’s response under the BJP government has been to moot the idea of an undersea pipeline project between Burma and India across the Bay of Bengal that would bypass Bangladesh.

What could convert such pipe dreams into a working international grid that could eventually serve the different needs of Iran, the Central Asian countries, Bangladesh, and Burma could be India’s needs as the world’s sixth largest energy consumer.

India’s consumption of gas jumped from 0.6 trillion cubic feet (tcf) in 1995 to 0.8 tcf in 2000 and is expected to reach 1.2 tcf by next year. India’s natural gas consumption was expected to have reached a 6.1 percent annual growth in 2002.

Some of this demand is already being met domestically. There have also been new discoveries off the coast of southern Andhra Pradesh state by Reliance Industries, a privately owned, Indian petrochemical major.

Reliance and Australia’s Broken Hill Proprietary area among the private players pushing strongly for the Iran-India pipeline project.

On the eastern side, major private backers include Shell and Unocal, both of which have invested substantially in prospecting the Bangladesh fields.

According to a study by industry specialist Alexander’s Oil and Gas Connections, released in March 2003, Shell has been in negotiations with Unocal to distribute gas from Bangladesh to India’s northern state of Uttar Pradesh, which is equally well- positioned to receive gas from Iran.

But there has been no firm commitment yet.

”If we have an exportable surplus and if Bangladesh exports natural gas, India is the natural choice because of the proximity,” was the closest that Bangladesh Foreign Minister Morshed Khan would venture to disclose following a meeting last week with Petroleum Minister Aiyar.

As for allowing the transit of gas from Burma to India through Bangladesh, Khan said this could be considered if the deal was ”mutually beneficial”.