The proposal to build the pipeline has been discussed for years but uneasy relations between nuclear rivals Pakistan and India prevented progress. But the plan gained momentum after a peace process between the South Asian nations began last year. The project's cost, legal framework to guarantee supplies and the possible route were discussed during the first meeting of the India- Pakistan Joint Working Group on pipelines in New Delhi on July 12-13. The cost of laying 2100-km of pipeline from Assaluyah port in Iran (on Persian Gulf) to Indian border (Barmer district in Rajasthan), may be US$7.42 billion, to be spent over the construction period of five years. A further increase in cost by 10 per cent would see the pipeline ending with an expenditure of US$8.16 billion while a 10 per cent reduction in raw material cost would bring capital expenditure down to US$6.67 billion. India has suggested the pipeline should initially bring 60 million cubic metres of gas a day in the first year, which should be upgraded to 90 million cubic metres in the second year and 120 million in the third year. The pipeline tariff would be about US$0.80 per million British Thermal Units if the project had a return on capital employed of 12 percent, and US$1.35 if the return on capital employed was 20 percent. 11 Doubts have been cast over the pipeline after U.S. Secretary of State Condoleezza Rice, on a recent trip to Asia, expressed concern, stemming from U.S. opposition to Iran's nuclear programme. Pakistan and India, seeking energy sources to fuel rapid economic growth, are also considering a gas pipeline from Turkmenistan through Afghanistan, but poor security in Afghanistan is likely to delay that project. India, which imports 70 percent of its crude oil and produces barely half the gas it consumes, is also hunting stakes in foreign oil projects and importing liquefied natural gas to meet the energy needs of its growing economy, Asia's third largest. Pakistan has however opposed India's plan to buy gas through the proposed pipeline at Rajasthan border directly from Iran saying Tehran cannot own the gas in Pakistani territory. To ensure safe delivery of gas and limiting its exposure in case of disruptions, New Delhi wanted Iran to own the gas till the delivery point at Pakistan and India border. However, Pakistan made it clear that involvement of National Iranian Gas Export Co (the gas exporting firm) in Pakistan territory will be "difficult". At the meeting, India suggested a 2,135-km route for the pipeline along the thickly populated coastal areas in Pakistan so as to minimise the risk of sabotage and wanted the line to be laid by either NIEC or a consortium of Iranian, Pakistani, Indian and international companies. But it wanted gas to be held by NIGEC throughout the 890-km stretch in Pakistan - from Gwadar on Iran-Pak border to Umarkot - and delivery directly at Barmer district border in Rajasthan by NIGEC so that New Delhi's obligations remained with NIGEC alone. Pakistan wanted India and Pakistan to buy gas from NIGEC in Iran and use the pipeline to be owned and operated by NIGEC/international firms/Indian and Pakistani firms for transporting the gas at respective delivery points. Alternately, the pipeline consortium can purchase gas from NIGEC at Assaluyah, the landfall point of gas from South Pars gas field in 12 Persian Gulf, and sell the same to India and Pakistan at respective delivery points. New Delhi wants the point from where Pakistan is to draw its share of some 60 million standard cubic meters per day of Iranian gas, to be closer to Indo-Pak border. India has kept open the option of joining the pipeline construction consortium but it wants delivery of (90 mmscmd of) gas at its border. New Delhi wants NIGEC to enter into back to back agreement with Pakistan for safe transit of gas through its territory and its delivery to India at Indo-Pak border. For the construction and operation of the pipeline, India suggested three options - it could be done by NIGEC alone or by a consortium comprising of NIGEC, GAIL India, Indian Oil Corp and Sui Gas of Pakistan or by NIGEC and any other international company. India and Pakistan at the end of two-day of technical talks decided to appoint separate financial consultants by September for advising on project structure before the two gas importers sign an Inter-Government agreement facilitating beginning of work on the project by early 2006. The consultants would also advise on legal, commercial and contractual framework that would guarantee safe delivery of gas at an affordable price. The two sides agreed that in order to realise a safe and secure world class project, arrangements would need to be provided for in every aspect of the project, including technical, commercial, financial and legal matters. While there was convergence on issues like quantity of gas, quality of gas, technical standards for the pipeline and techno-economic considerations, the two sides will meet again by next month end to detail risk mitigation and inter-government 'Framework Agreement' for the project. The consultants are to submit their reports by November end when Petroleum Minister Mani Shankar Aiyar travels to Islambad to meet his counterpart Amanullah Jadoon for initialing a project agreement. The bilateral talks will ultimately converge into a tripartite agreement with Iran also joining in once the importers agreement on a 'Framework Agreement.' Three separate sets of bilateral talks between India and Pakistan, Pakistan and Iran and India and Iran, were going on and these would merge into a trilateral agreement once clarity on project issues was reached. India would before the August JWG submit a draft text of a 'Framework Agreement' which would draw from experience of multi-nation pipelines like the Baku-Tiblisi-Cehyan oil pipeline, to Pakistani side. Indian Petroleum Minister Mani Shankar Aiyar had last month met his Pakistani counterpart Amanullah Jadoon and Iranian Oil Minister Bijan Namdar Zanganeh separately to see the project get off the ground by early 2006. Jadoon and Zanganeh last week signed a MoU on the project. Another round of bilaterals - India- Pakistan, Pakistan-Iran and India-Iran - may happen before the talks lead to a trilateral agreement. The JWG delibrated on issue of lead promoter for the gas transport company and the extent of equity participation by Indian and Pakistani firms in this company, the debt/equity options and a strategy for participation by Indian and Pakistani companies in upstream projects in Iran. The Framework Agreement would address the joint declaration to be made by all three countries and commitments to be made by each government, risk analysis and prevention, dispute resolution and arbitration including the venue and governing law of arbitration. The two sides noted with satisfaction that each of them had initiated the process of joining the Energy Charter, initially with 'Observer' status. They agreed that in the various intergovernmental agreements entered into by them in respect of the project, the provisions of the Energy Charter would be referred to. The nations also discussed the other pipeline proposals under consideration by them, i.e. the Turkmenistan-Afghanistan- Pakistan (TAP) pipeline and the Gulf-South Asia (GUSA) pipeline. They noted that India had been invited to attend the next meeting of the Steering Committee of the TAP project. The Pakistani side briefed the Indian side on the latest developments pertaining to the project as also on their recent discussions pertaining to the GUSA project. PIN/PTI