Oh, yes. As per IP agreement the price of gas was 11 dollars per MMBTU when crude oil is 100 dollars per barrel. With the past month's average oil price at 45 dollars, the price of IP gas would have been about 5 dollars per MMBTU. This price included the cost of transport.
This is not rocket science. It is matter of simple thermodynamics. Turning natural gas to liquid needs alot of energy. And then transporting this boiling liquid and then re-garsifying it at the port, means additional costs. LNG tankers are not cheap. Transporting cost for every MMBTU is about 2 to 3 dollars and then there is the cost of re-gasification which would add another dollar or two. In all you will have to add at least 3 to 4 dollars per MMBTU to the article's figure of 7 dollars in order to compare it with IP gas. This would mean 3+7=10. Exactly twice the price of IP.
But this should be the least of Pakistan's worries. What should worry Pakistanis, is the transparency and the pricing formula of this 15 year deal. Because if next year, or 3 years from now or 5 years from now, oil goes up to say 150 dollars a barrel (as presidents of ENI and BP had warned could happen in a few years), then Pakistan will be stuck with a super expensive gas deal. Imagine paying 24 dollars per MMBTU, then add the transportation costs and re-gasification costs. And because the deal is for 15 years, backing out of it means severe penalties stipulated by international arbitration court. Now, India's situation is different, they have fixed the price at 9 dollars per MMBTU so it really does not bother them whether oil be at 300 dollars or 30. But for Pakistan this will be consequential.
There has been alot of propaganda against IP in Pakistan by certain elements. I have even read Pakistanis news in which Pakistani officials are claiming that IP is not economical because, the cost of building the pipeline from Iran's border to Pakistan would cost 8 billion dollars. Yes, you read it correct, they are telling their gullible people, that it cost EIGHT billion dollars and that Iran's gas is expensive. For 8 billion dollars you can build a pipeline from Russia to India via China. But then these propaganda have a purpose. To enrich the pockets of a few people who will benefit from such LNG deals. IP agreement was free from any kickbacks and commissions.
Another point Pakistanis have to remember is the fact that Pakistan had rescheduled its old foreign debts and has taken new loans in the past 7 years. These are to mature in 2017 when Pakistan will finally have to start full payment to creditors on these loans (WB, IMF, Paris Club etc etc). This would put enormous pressure on Pakistan in terms of foreign currency outflows. Combined with the fact that by that time, US has left Afghanistan and does not need Pakistan anymore, and therefore can even cut aid or sanction Pakistan, all these mean bad times ahead. In bad times, you have to be really careful how you spend your money. On a super expensive gas deal with fat and juicy kickbacks and commissions or on projects that can actually deliver.
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