PAKISTANI INDUSTRIALIST DISCUSSES IRAN PIPELINE,

UNCLAS ISLAMABAD 000322 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ENRG EPET PGOV PK SUBJECT: PAKISTANI INDUSTRIALIST DISCUSSES IRAN PIPELINE, ENERGY ISSUES REF: A. ISLAMABAD 170 ¶B. ISLAMABAD 139 ¶1. (SBU) Summary: Charge met with Mr. Zaheeruddin, Chairman of Shahzad International Group, January 17 to discuss energy issues and the proposed Pakistan-Iran pipeline. Mr. Zaheeruddin opined the pipeline will never be constructed due to lack of funding. He also complained the gas sale purchase agreement binds the GOP into paying more for Iranian gas than it pays domestic producers. End summary. ¶2. (SBU) Mr. Zaheeruddin, Chairman of Shahzad International Group, called on Charge January 17 to discuss his company's operations and Pakistan's ongoing energy concerns. Shahzad International Group has become one of Pakistan's leading oil and gas exploration companies and Mr. Zaheeruddin boasts numerous former GOP officials and military leaders among his 1,500 employees. Its subsidiary, Petroleum Exploration Limited (PEL),will drill 31 wells in the next three years and has partnered with BP to explore three offshore parcels. The group is also constructing a 120 MW power plant at Sukkur in northern Sindh Province. The Sukkur plant will be completed in 24 months and could expand to 240 MW but will not be able to cover the current 600 MW shortage in Sukkur, let alone supply power to the larger cities of Sindh or Punjab. Shahzad International is also constructing a 50 MW hydro-electric plant in Kashmir and operates gold and precious stone mines in Pakistan's Northern Areas. ¶3. (SBU) Mr. Zaheeruddin stated U.S. opposition will prevent construction of the Pakistan-Iran pipeline because no one will be willing to finance it. He complained the gas sale purchase agreement with Iran approved by the GOP January 8 (Ref. B) gives Iran a better price for its gas than the GOP will pay domestic suppliers. He also said a pipeline running from Turkmenistan through Afghanistan to Pakistan and India is feasible but would be much more expensive and difficult to maintain because of security concerns in Afghanistan and Baluchistan than a pipeline from Iran. Additionally, he stated there are concerns that Russia claims it gets first priority for Turkmen gas, but his sources in Turkmenistan maintain there is enough capacity to satisfy the Russians and supply a southern pipeline. ¶4. (SBU) Mr. Zaheeruddin feels the solution to Pakistan's energy woes is for the GOP to stop interfering in business matters, establish a set tariff for any particular type of energy project, then allow companies to come in and supply the energy for that price with no strings attached. In the short term, the GOP should bring in generators on barges to cities like Karachi. He claimed these barges can produce clean drinking water in addition to electricity and are already in use in Bangladesh. Mr. Zaheeruddin concluded by claiming the key to business success in Pakistan is to stay out of politics - an interesting statement from someone who boasts about the number of former government officials he employs. PATTERSON