The Oman-India Gas Pipeline Project: Need to Resurrect Again

30 May, 2001    ·   503

Om Prakash argues for the Indo-Oman gas pipeline project
Om Prakash
The much hyped and decade old proposal for the Indo-Oman gas pipeline has not been implemented due to lack of political will and on account of several geo-political factors considering its potential to fill the huge demand-supply gap of natural gas in the coming years, the project is still viable if some major limitations are removed. 

 

 

The rapidly growing demand for natural gas in India needs to be tackled with a pragmatic mindset. Gas sales in the country increased at an annual rate of 7.5 per cent during the period 1990-2000. The demand for gas arises from its use in power generation and fertilizer production. Gas sales in 1998-99 aggregated 22.5 billion cubic meters, while its production stood at 27.4 billion cubic meters. Domestic gas availability is expected to decline to about 16 billion cubic meters by 2011-12, hence this rising gas demand in the country would have to be met by importing gas.  

 

 

The history of this pipeline project goes back to the year 1985, when Oman and India signed an agreement to expand the development of energy-related enterprises between the two countries. In mid-1992, a joint commission was set up to identify and monitor several new areas of cooperation between Muscat and New Delhi . 

 

 

In June 1993, during Indian Prime Minister P.V.Narasimha Rao’s visit to Muscat , a Memorandum of Understanding was signed to construct an underwater gas pipeline. This would connect Sur in the Oman to Gujarat through the Indian Ocean . Subsequently, Oman awarded the Indian Navy a $5 million contract to undertake hydrographic surveys of the Omani coast, covering the coastline and the seabed. 

 

 

The 1450 Km long and 1.07meter diameter Oman gas pipeline project was designed to transport 56 million cubic meter of gas per day to India . It would lie at a depth of 3000 meters. The Oman oil company sought the cooperation with American (Bechtel and Mc Dermott), Italian (Sanprogetti and Saipem) and Indian (Engineers India Ltd.) in June 1993, since a gas pipeleline has never been laid in such deep waters. So the engineering and technical challenges are immense, however in November 1993, it was announced that the project is technically feasible. The engineers involved in the feasibility study were optimistic that the technical problems encountered would be solved by using an advanced technology which would require several pumping stations along the pipeline. 

 

 

Estimated to cost about $5 billion, the pipeline would pass through the continental shelf of Iran and Pakistan , which necessitated agreements with both the countries. However, Pakistan is against laying the pipeline through its continental shelf, citing various technical, economic, defense and strategic reasons. It says the project will cost 1.5 times more if laid under water. It favors an overland pipeline, which will also ensure gas supply to energy-starved Pakistan . But India is not in favor of an onshore pipeline, which could place India at the mercy of the rival country. Negotiations, confidence building measures and regional cooperation on these issues are imperative. If the Indus Water Treaty can survive two major wars between India and Pakistan , there is no room to be pessimistic. The apprehension that Pakistan can cut the supply in the case of a war can be ruled out on three counts. Firstly, by doing so Pakistan would become economically and internationally isolated. Secondly, it will besmirch its credibility, as an investor friendly country, which can hamper the much needed Foreign Direct Investment. Thirdly, Pakistan would receive millions of dollars in transit fees which would restrain it from any misadventure to disrupt gas supply.   

 

 

The import of gas through the pipeline is the best option, because it reduces the cost to 35 per cent as compared to Liquefied Natural Gas (LNG) import through sea tankers. The main problem with LNG project is the pricing structure. The estimated cost in the range of US $3 to US $4 per Giga Joule, is too high since domestic coal can be delivered at US $2 per Giga Joule. However, these two projects of importing natural gas and LNG can go on simultaneously, but Oman has yet to assess if it has sufficient reserves for both the projects.   

 

 

There is nothing new about withdrawing from the pipeline project. This has happened in the past also, only to be revived again. What is most important is to remove all hindrances and bottlenecks. To maintain an impressive 8-9 per cent growth rate of the Indian economy, the energy sector needs to be nurtured.  

 

 

 

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