Oild and Gas Pipeline conflicts with special reference to Iran Pakistan Gas pipeline

1. OIL AND GAS PIPELINE
CONFLICTS
CASE STUDY:
IRAN PAKISTAN GAS PIPELINE PROJECT
Qarib Kazmi
Course: Conflict Management

2. FOSSIL FUEL’S USAGE AND SCARCITY
 Fossil Fuels, oil, natural gas, and coal, are energy resources that
formed millions of years ago from plant and animal life
 Estimated to provide around 85% of the worlds total energy
demands
 Relatively inexpensive, which makes fuels for
electricity, heating, and transportation available to a greater
amount of people
 It takes around 300 million years to renew and is being
consumed at an alarming rate
 The world’s proven oil reserves of 1,383.2 billion barrels will last
for only 46 years if oil production and consumption are to remain
at current levels, according to BP Statistical Review of World
Energy. The world’s natural gas reserves will also last for just 59
years if production is to continue at the 2010 rate.

3. HISTORY OF OIL/GAS PIPELINES
 In 1865 a 6in diameter gravity (no
pumps) oil line was built in
Pennsylvania, USA, transporting 7000
barrels/day.
 By the advent of WW I, crude oil
pipelines were traversing much of the
USA
 The next big change in pipeline
engineering was the building of long
distance, large diameter pipelines
 Pioneered in the USA in the 1940s due
to the energy demands of the Second
World War
 As the world emerged from the Second
World War it was able to build high
pressure, long distance, oil and gas
pipelines.

4. SOME HISTORY
CONFLICTS IN WHICH OIL WAS USED AS A
WEAPON
 1967 Arab oil Embargo
 1973 Oil crisis (OPEC oil Embargo)
 1979 Energy Crisis

5. 1967 ARAB OIL EMBARGO
 June 6, 1967, one day after the beginning of
the Six-Day war
 Joint Arab decision to deter any countries
from supporting Israel militarily
 Several Middle Eastern countries limited
their oil shipments
 Not very effective due to lack of solidarity
 Ended on September 1 with the issuance of
the Khartoum Resolution

6. 1973 OIL CRISIS (OPEC OIL EMBARGO)
 October 1973, when OPEC proclaimed an
oil embargo
 Egypt and Syria, with the support of other
Arab nations, launched a surprise attack on
Israel
 United States chose to re-supply Israel so
OPEC decided to "punish" the United States.
 Negotiation to arrange an Israeli pull back
from the Sinai and the Golan Heights after
the Arabs withdrew from Israeli territory.

7. 1973 OIL CRISIS (OPEC OIL EMBARGO)
 Embargo lifted in March 1974 after a negotiated
settlement between Israel and Syria reached.
 OPEC members used
their leverage over the
world price-setting
mechanism for oil to
stabilize their real incomes
by raising world oil prices
 The 1973 "oil price shock",
along with the 1973-1974
stock market crash, had a persistent economic effect

8. 1979 ENERGY CRISIS
 Occurred in the wake of the Iranian
Revolution.
 Protests disrupted the Iranian oil sector, with
production being greatly cut.
 Under the new regime, oil exports were
inconsistent which pushed prices up.
 In 1980, following Iran-Iraq war, oil production
in Iran nearly stopped, and Iraq's oil production
was severely cut as well.
 After 1980, oil prices began a 20-year
decline down to a 60 percent price drop in the
1990.

9. OIL PRICE GRAPH

10. FUTURE PRICING PREDICTIONS
 If Oil and gas prices continue to go up then the world
energy scene can witness new
players entering into the
scene.
 One example is Canada
with its HUGE reserves
of OIL sand reserves.
 Natural bitumen reserves
are estimated at 249.67
billion barrels globally,
of which 176.8
billion barrels are in
Canada, 42.009 billion barrels in Kazakhstan and
28.38 billion barrels in Russia.

11. PAST AND PRESENT GAS CONFLICTS
 Russian-Ukraine gas dispute and European
Gas crisis of 2009
 Major GAS suppliers and Consumers
 Syrian pipeline WAR

12. RUSSIAN-UKRAINE GAS DISPUTE AND
EUROPEAN GAS CRISIS OF 2009
 Conflicts between Ukrainian oil and gas company and Russian gas
supplier Gazprom over natural gas supplies and debts
 About 80% of natural gas
going from Russia to Europe
travels through pipelines
across Ukraine which
currently account for 25%
of Europe requirements
 Conflict in March 2005 over
the price of natural gas
supplied and the cost of
transit
 Conflict in 2008 over Ukrainian
gas debts; resulted in supply
disruptions in many European nations starting from 7th
January, 2009
 Gas supply restored on 21st January, 2009

13. EUROPE'S DEPENDENCE ON RUSSIAN GAS

14. MAJOR RUSSIAN GAS PIPELINES TO EUROPE

15. LIST OF COUNTRIES BY PROVEN
RESERVES

16. LIST OF COUNTRIES BY GAS PRODUCTION

17. LIST OF COUNTRIES BY CONSUMPTION

18. SYRIAN PIPELINE WAR
 The oil ministers of Iraq, Iran and Syria Monday 25 July
2011 signed a preliminary agreement for a $10 billion
1,500 kilometers natural-gas-pipeline deal, the official
Iranian News Agency IRNA and other Iranian media
reported.
 Possible extension to Lebanon to reach Europe
 The pipeline would be essential to diversify Europe's
energy supplies away from Russia.
 An oil importer in the 1950s and 60s with little
production of its own, Syria became a net exporter of oil
by the 1980s; it is now a country whose depleting
reserves will lead to petroleum imports soon exceeding
exports once again.
Source http://online.wsj.com/article/SB10001424053111903591104576467631289250392.html
http://openoil.net/2012/03/28/syrias-transit-future-all-pipelines-lead-to-damascus/

19. THE COMPETING GAS PIPELINES
 IPI
 TAPI
 NABUCCO
 South Stream
 Blue Stream

20. THE IRAN PAKISTAN GAS PIPELINE
 Also known as the IP pipeline or the Peace pipeline, is a
partially constructed pipeline to deliver natural
gas from Iran to Pakistan.
 An agreement signed in 1995; foresaw construction of a
pipeline from South Pars gas field to Karachi in Pakistan.
 Later Iran made a proposal to extend the pipeline from
Pakistan into India; in February 1999, a preliminary
agreement between Iran and India was signed
 In April 2008 and August 2010,Iran invited China and
Bangladesh to join the project respectively.
 In 2009, India withdrew from the project over pricing and
security issues, and after signing a civilian nuclear deal
with the United States in 2008.

21. THE IRAN PAKISTAN GAS PIPELINE
 On 16 March 2010, Iran and Pakistan signed
an agreement on the pipeline according to
which, each country must
complete its section by 2014
 In July 2011, Iran announced
that it has completed
construction of its section.
 In case Pakistan fails to fulfill
its obligation, it will have to
pay a daily penalty of $1 million
to Iran until completion.
 On 4 September 2012 the
project was announced to
commence before October
2012 and be completed by December 2014

22. THE IRAN PAKISTAN GAS PIPELINE
 The pipeline has diameter of 56 inches
(1,400 mm)
 It is expected to cost US$7.5 billion
 The pipeline will carry only 8.7 billion cubic
meters of gas per year and 40 billion cubic
meters as a maximum capacity
 Already the delay in the construction has
caused much damage to Pakistan and now the
gas will cost Pakistan $6 per million BTU more
as compared to 2007.
(http://www.brecorder.com/top-news/1-front-top-news/51923-ip-pipeline-project-pakistan-to-pay-
6mmbtu-more-for-gas-price-.html)

23. IS TAPI AN OPTION FOR PAKISTAN
 Turkmenistan's gas reserves are seriously
overcommitted and would be unlikely to be
sufficient to meet
demand from China,
TAPI, and the
projected western
route linking the
TCP and Nabucco.

24. IS IT FEASIBLE???
 A land-based pipeline would be four times cheaper than
any other option.
 IP is a direct from Iran as opposed to TAPI has
Afghanistan in between.
 The Government of Pakistan has determined that the
natural gas from Iran would provide the cheapest fuel for
power generation
 TAPI is $13 per million BTU
 IP is $ 11 per million BTU (in 2007 it was offered at $ 6)
 LNG from Qatar would cost $ 18 per million BTU
 If China joins the project Pakistan stands to Receive $
500 million in annual transit fees.
 So what’s the conflict?
Source http://www.brecorder.com/top-news/1-front-top-news/51923-ip-pipeline-project-pakistan-to-pay-6mmbtu-more-for-gas-
price-.html

25. STAGE I : POTENTIAL OPPOSITION OR
INCOMPATIBILITY
 First and foremost, Washington views Iran as a
major obstacle, indeed a threat, to the
realization of its strategic objectives in the
Middle East, especially the Persian Gulf region.
 The control over the oil and gas resources of
the Persian Gulf region is a major US strategic
objective, the other being the security of Israel
as an ally and an outpost of the West in the
region.
 In essence, Washington considers the Islamic
Revolution as a threat to the US-friendly order in
the Middle East.

26. IRAN’S NUCLEAR PROGRAM
 Iran, while insisting on its right to carry out uranium
enrichment under the Nuclear Non-Proliferation Treaty
to which it is a party, has categorically stated that its
nuclear program is peaceful in character and that it
has no intention of developing nuclear weapons.
 As of July 2012 Europe and Japan have stopped
purchasing Iranian oil as part of the new round of UN
sanctions on Iran.

27. IRAN SAUDI : SECTARIAN AND RELIGIOUS
CONFLICT
 Conflict between the two countries also played a
pivotal role in the Iran–Iraq war when Saudi
authorities pledged US$25 billion of aid to the Iraqi
government of Saddam Hussein
 1987 Hajj Incident.
 March 2007 visit of Ahmadinejad's to Saudia was
significant. During the coverage countries were
referred by the press as "brotherly nations―.
 In 2009, Saudi prince Faisal said in a press
conference with Hillary Clinton that the "threat posed
by Iran demanded a more immediate solution than
sanctions." A statement condemned by Iranian
officials.

28. IRAN QATAR RELATIONS
ECONOMIC CONFLICT
 Mostly Cordial
 Iran Qatar Share the south
Pars Gas Field. Its 20% of
all proven GAS reserves
in the world. 51 trillion
Cubic Meters.
 Its 99% of all GAS
reserves of Qatar and
38% of Iran’s proven
reserves.

29. INDIA’S MISTRUST ON PAKISTAN
MILITARY CONFLICT
 India was initially actively
involved in the GAS pipeline
project but backed out due to US
pressure and Mumbai Attacks in
2008.
 Further more it was reluctant to
Hand over its energy future to
Pakistan by committing to this
project. India BTW will have to
pay a royalty fee to Pakistan as
Transit Fee if it joins the project.
 India’s needs at the moment are
not that pressing as Pakistan's.

30. STAGE II : COGNITION AND PERSONALIZATION
PERCEIVED CONFLICT
 Saudi Arabia feels a severe threat from
Iran, although Iran has never talked of
attacking any Muslim country.
 US conflict with Iran can be considered
as perceived conflict as it is based on the
assumption that Iran is pursuing nuclear
ambitions, which would in turn destabilize
the whole of middle east.

31. STAGE II : COGNITION AND PERSONALIZATION
FELT CONFLICT
 NABUCCO vs Russian South Stream.
 The South stream is very expensive to build (Euros
15.5 Billion)
 Mainly used by Russia to detract
 The Nabucco is plagued with resourcing issues.
Supplier :
 Azerbaijan
 Turkmenistan?
 Iraq?
 Egypt
 Iran?
 Russia?

32. PROSPECTIVE SUPPLIERS TO NABUCCO
http://en.wikipedia.org/wiki/Nabucco_pipeline

33. STAGE III : INTENTIONS
 Saudi Arabia is behind the scenes opposing the pipeline. Offered
a bail out plan for energy shortage and Credit line to stop
pakistan form proceeding.
(Source http://dawn.com/2012/04/15/iran-gas-pipeline-saudi-offer/)
 America has said it on many occasions that it is against this
pipeline, but has done little to provide viable alternatives and help
for the energy starved Pakistan.
 Pakistan has until now successfully resisted the pressure and is
going ahead with the pipeline project, but is finding it hard to
obtain funding for the project.
 Iran has completed its part of the pipeline and is very keen on
making this project a reality. It has offered a $500 million credit
line to Pakistan for the project. Iran has also re-invited India to
join the project

34. STAGE III : INTENTIONS
 Israel is Backing the TAPI which according to some sources is owned by
Israeli MEHRAV company (http://afghanistantapipipeline.blogspot.com/2012/05/tapi-afghan-connection.html)
 Turkmenistan is the key supplier for the TAPI project but Pakistan and
India still don’t trust them and their claims for providing the GAS that
they claim. India and Pakistan have demanded an independent audit of
the Turkmenistan GAS reserve claims.
(https://www.cimicweb.org/Documents/CFC%20AFG%20Social%20Well-being%20Archive/CFC_Afghanistan_TAPI_Feb12.pdf)
 India is still playing the waiting game on the IP pipeline. Although both
Pakistan and Iran have still left doors open for India.
(http://tribune.com.pk/story/427544/ipi-pipeline-iran-may-ask-india-to-push-ahead/)
 China in the mean time has built OIL and GAS pipelines from
Turkmenistan, the Central Asian Gas Pipeline.
 Russia is not causing any hindrances to the project as this project helps
its goals of delaying work on NABUCCO pipeline which competes with
the Russian South Stream. GAZPROM was in a
 Europe's big choice NABUCCO or South Stream.
(http://arirusila.cafebabel.com/en/post/2009/05/15/EU%E2%80%99s-big-choice-%E2%80%93-Nabucco-or-South-Stream)

35. STAGE IV: BEHAVIORS
SAUDI
 According to Le Figaro, on
June 5, 2010, King Abdullah of
Saudi Arabia told Hervé
Morin, the Defense Minister of
France that: "There are two
countries in the world that
do not deserve to exist: Iran
and Israel.
 In 2012, in response to the
global sanctions against
Iran, Saudi Arabia offered to
offset the lost Iranian oil sales
and Iran warned against this

36. STAGE IV: BEHAVIORS
AMERICA
 U.S. Secretary of State Hillary Clinton has threatened
Pakistan with sanctions if the country continues with
plans to build a natural gas pipeline to Iran.
 On 10th December 2012
Richard Olson during
his visit to the Quaid’s
mausoleum, US
ambassador
talking to media said that
US has reservations on
Pak-Iran gas pipeline
project and at the same
time extended his
country’s cooperation in Pakistan energy sector.

37. STAGE IV: BEHAVIORS
RUSSIA
 Russia has been pushing hard at
the South Stream project which is
in direct competition with the
NABUCCO.
 But Interestingly it has also
proposed another pipeline the Blue
Stream that can also be one of the
suppliers to NUBUCCO.
 Along with this it is also trying to
coax the central Asian states
Tajikistan, Uzbekistan and
Kazakhstan to send their Oil and
GAS north as opposed to south to
fill up the existing Russian gas
pipeline structure.
 The NORD stream is another of its
proposals to bypass Ukraine and
supply gas directly to Germany.

38. STAGE IV: BEHAVIORS
CHINA
 On December 14, 2009, China and Turkmenistan formally
opened the longest natural gas pipeline, which runs from
Turkmenistan through Central Asia to China 7000 km.
 Initially Turkmenistan will be the only supplier of gas through this
pipeline, by 2011 Uzbekistan and Kazakhstan will open up the
second line, which is also 1833 km long, and will enable China to
get gas from all three Central Asian producers.
 China's total Turkmen gas imports in August stood at an average
of 2 Bcf/day, up 52.7% year on year. This brings China's total
pipeline imports for the month to 2.02 Bcf/day, up 54.2% year on
year.
 The Turkmenistan-China pipeline was negotiated, signed and
built within three years.

39. STAGE IV BEHAVIORS:
PAKISTAN
 Pakistan, Iran likely to sign pact on gas pipeline
as of 7 December 2012.
 ―During the upcoming visit of the President, all
matters relating to the project would be
finalized,‖ Pakistan’s Frontier Works
Organization along with an Iranian company
are like to complete the project.
 Sources said that Pakistani and Iranian teams
have finalized the draft of the Inter-
Governmental Cooperation Agreement
(IGCA).

40. STAGE IV : BEHAVIORS
PAKISTAN, THE BALUCHISTAN ISSUE
 Now seemingly the IP firmly in place, the
strategic spotlight focuses even more on
Baluchistan.
 The port of Gwadar, in southwest
Balochistan, near the Iranian border, is indeed
bound to become a new Dubai, but will it be US
version of Dubai or Chinese, only time will tell.
 This all raises the crucial question: how will
Islamabad deal with ultra-strategic
Baluchistan.
 Gwadar - a port built by China - is the absolute
key. It is the essential node in the
crucial, ongoing, and still virtual Pipelineistan

41. STAGE V OUTCOMES
EFFECT OF THE IRANIAN OIL EMBARGO
 Get ready for higher oil prices. Due to shortage
of Iranian OIL in the market.
―One can say, of course,
that the deficit will be
covered, but (some)
refineries are geared
specifically to Iranian
oil ... and readjusting
them will demand
substantial investments
that the EU can hardly
afford now,

42. THE STRAIT OF HORMUZ
 In 2011, total world oil production
amounted to approximately 87
million barrels per day (bbl/d), and
over one-half was moved by
tankers on fixed maritime routes.
 The Hormuz strait is the busiest
chokepoint and 17 million Barrels
per day pass through it.
 The international energy market is
dependent upon reliable transport.
The blockage of a chokepoint, even
temporarily,
can lead to substantial increases in
total energy costs

43. GEOGRAPHICALLY

45. MAJOR OIL SUPPLIERS
Oil -
Date of
Rank Country/Region consumption
information
(bbl/day)
- World 93,250,000 2010 est.
1 United States 19,150,000 2010 est.
- European Union 13,680,000 2010 est.
2 China 9,400,000 2011 est.
3 Japan 4,452,000 2010 est.
4 India 3,182,000 2010 est.
5 Saudi Arabia 2,643,000 2010 est.
6 Germany 2,495,000 2010 est.
7 Canada 2,209,000 2010 est.
8 Russia 2,199,000 2010 est.
9 Korea, South 2,195,000 2011 est.
10 Mexico 2,073,000 2010 est.

46. MAJOR OIL CONSUMERS
Date of
Production Share of Info
Rank Country
(bbl/day) World %
— World 87,500,000 100% 2011
2009-
— OPEC 33,327,700 38.08%
2011
— Arab League 24,171,503 29.71% 2009
1 Russia 10,540,000 12.01% 2011
2 Saudi Arabia 10,270,000 10.06% 2011
3 United States 9,688,000 8.91% 2011
4 Iran 4,252,000 4.77% 2010
5 China 4,073,000 4.56% 2011
6 Canada 3,483,000 3.90% 2010
7 Iraq 3,100,000 3.75% 2011
8 Mexico 2,983,000 3.56% 2010
United Arab
9 2,813,000 3.32% 2009
Emirates
10 Brazil 2,572,000 3.05% 2009

47. NEGOTIATIONS AND STRATEGIES
 India Bargained for a Civil Nuclear Technology transfer
deal. But India now feels that it has not done good for
itself by opting out of the IPI.
 America is Offering Pakistan TAPI which is Unrealistic
and Hydal project support which is un reasonably LOW.
 Saudi Arabia offered Pakistan a soft loan and OIL credit.
 Outright pressure of America and US and NATO backed
UN sanctions on Iran and on any company that deals with
Iran.
 Iran’s counter offer of providing Pakistan a credit line of
$500 million to build its side of the pipeline.
 Pakistan was expected to seal the deal on this with Iran
on 7th December 2012. As of today Pakistan has
unexpectedly cancelled its trip to Tehran for signing of the
deal.

48. POSSIBLE SOLUTIONS AND RECOMMENDATIONS
 International Lobbying. The Non Aligned Nations
Conference in Iran.
 Involving Nations like Russia, China to finance
and own stakes in the project.
 Govt of Pakistan can raise funds itself by
employing some development fund charges.
 Better leadership and Equal’s level talks with
America on this and other issues.
 Role of media in forming public backing is very
vital.