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Prepared by the
Institute for the Analysis of Global Security

January 12, 2005
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Energy Security Current Issue

A strategic approach to pipeline security
Aside from BTC, a consortium of Western energy companies has already started the construction of the South Caucasus Gas Pipeline. Thus far the host countries of the pipelines along with the Western energy companies have taken responsibility for the protection of the critical energy infrastructure. Yet, it is clear that by sole attention to the military aspects of the pipeline protection it will be impossible to guarantee their full protection. The host countries can upgrade their pipeline protection units and patrol teams and purchase the most advanced technology in the world. Baku based analyst Fariz Ismailzade argues that to achieve longterm security the communities along which the pipelines will pass be must be involved in the protection process.

Terrorism Goes to Sea
New evidence suggests that piracy is becoming a key tactic of terrorist groups. In light of al Qaeda's professed aim of targeting weak links in the global economy, this new nexus is a serious threat: most of the world's oil and gas is shipped through pirate-infested waters. In a recent Foreign Affairs article, IAGS' Gal Luft and Anne Korin analyze the situation and recommend policies to mitigate the risk.

Radical Islam and LNG in Trinidad and Tobago
Trinidad and Tobago alone account for 80% of all U.S. LNG imports. Security analyst Candyce Kelshall warns that Islamist terrorist groups are active on the island and might find LNG shipping an attractive target.

Chinese Quest for Crude Increases Focus on Africa
Leading oil sector analysts have warned of growing conflict between Western and Asian countries as they seek to outbid each other for key hydrocarbon assets in Africa. These forecasts have been largely based on the expectation that China will become the major player in nontraditional oil and gas producing regions on the continent. IAGS Associate Fellow Cyril Widdershoven discusses.

Terror's Big Prize
Since September 11, pipelines, tankers, refineries and oil terminals have been attacked frequently. Except for a sharp increase in maritime insurance premiums in these regions these attacks had marginal strategic consequences. But in at least two cases oil terrorism could have rattled the world.

Needed: Three 1-billion-barrel oil banks
The lesson from the recent oil price jump is that the oil market has too little wiggle room to deal with supply disruptions. It's time for consuming nations to think about providing their own liquidity mechanisms.

On the technology front

Fuel Cell power plant installed at NJ College
The fuel cell will provide 250 kilowatts of electric power as well as heat, to several buildings on the campus.

Biomass-to-Ethanol Progress
The enzyme costs of converting cellulosic biomass into sugars for fuel ethanol production have been reduced approximately twenty-fold with technology developed by the National Renewable Energy Laboratory (NREL) and Denmark based Novozymes, biotech-based leader in enzymes and microorganisms.

EU study: Methanol from biomass - competitive with gasoline
A study of a new patented Swedish technology concluded that the alchohol fuel methanol can be produced from biomass via black liquor gasification at a cost competitive with that of gasoline and diesel.

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Back Issues

Iran-Pakistan-India pipeline: the Baloch wildcard

For both energy hungry India and its swiftly growing neighbor, Pakistan, the need for natural gas is more pressing than ever. Pakistan has one of the world’s fastest growing populations and its demand for gas will expand significantly over the next two decades. India’s gas demand will almost double by 2015 and due to the decline of its reserves it will be forced to import increasing amounts of gas. As the world’s second largest gas reserve, Iran is the most geographically convenient supplier of gas to both countries.

India considered three transport routes for gas from Iran: shipping it through the Arabian Sea on board tankers in the form of LNG, sending it through a deep sea pipeline, or alternatively transporting it on land via a 1700-mile pipeline from Iran’s South Pars field to India. The latter option means 475 miles of the pipeline will pass through Balochistan in southern Pakistan.

A land based pipeline would be four times cheaper than any other option, even after taking into account transit fee payments to Pakistan. But for a long time political tensions between India and Pakistan made it difficult for Delhi to accept an energy project that would create dependence on a neighbor with whom its relations are far from stable. Recent improvement in the relations between the two neighbors has bought India to finally consider joining forces with Pakistan for the mutually beneficial pipeline project, estimated to cost around $4 billion. A third of the gas would be delivered to Pakistan and the rest to India.

For Iran, India’s participation in the project is of paramount importance. In addition to a broader market for its gas Iran hopes to gain political support from India as it is facing strong international pressure to terminate its nuclear program. In return for India's agreement to buy large quantities of gas, Iran has awarded Indian gas companies major service contracts and also granted them participation in refining and other energy related projects to the tune of $40 billion. Iran’s relations with Pakistan are also strategically important. With American troops stationed in neighboring Afghanistan and Iraq, Iran is trying to check U.S. influence in the region by strengthening its ties with Pakistan, one of America’s most needed allies in the war on terror. The Pakistanis, for their part, would like to see their territory used as a transit route to export natural gas to India. This would not only guarantee a source of income for them but also increase stability in the region. Pakistani Prime Minister Shaukat Aziz said the Iran-Pakistan-India gas pipeline is "a win-win proposition for Iran, India, and Pakistan," that could serve as a durable confidence-building measure, creating strong economic links and business partnerships among the three countries.

But this win-win proposition seems to be threatened by terrorists. A few days after Iran’s Oil Minister Bijan Namdar Zanganeh arrived in New Delhi to discuss the future of the pipeline, terrorists in Pakistan blew up two gas pipelines sending a message to all parties involved that the "pipeline of peace" might be anything but peaceful.

The area of the Balochistan-Punjab border where the pipeline is supposed to run is one of Pakistan's poorest areas and its most restive province. In recent years it has been a battleground of private militias belonging to Baloch tribes. Sporadic armed clashes resulted in attacks against water pipelines, power transmission lines and gas installations. Yet, the region strategically important due to its large reserves of oil and gas. But these riches did little for the Baloch tribesmen. Over the years Islamabad has failed to provide a fair share of the oil and gas wealth. Lack of economic progress and a deep sense of disaffection has contributed to the distrust between the federal government and the Baloch people. As a result, the tribes now oppose any energy projects in their area. In January 2003, sabotage of a gas pipeline from Sui cut off supply to the Punjab. Later, in June, a wave of attacks against gas installations caused the government to send troops to protect the installations. For the rest of 2003 and the following year the confrontation was defused but the underlying grievances of the local population were not addressed. To calm the area Islamabad recently added carrots to its policy of sticks by increasing investment in regional development projects. However, it seems that violence has resurfaced and the region is sliding into a near war situation.

On the night of January 8 terrorists belonging to the Baloch Liberation Front (BLF) fired rockets at the pipeline and exchanged gunfire with the security forces for several hours. During the fire exchange the pipeline caught fire, disrupting supply to a power plant. Six people were killed. In a separate incident the BLF launched an attack on the pipeline close to Sui township, 250 miles north of Karachi. This area alone produces about 45 percent of Pakistan’s total gas production. Some rockets also exploded close to the main pipeline supplying gas to Sindh and Punjab provinces but did not cause any damage. On January 11 Baloch gunmen stormed facilities operated by state-run Pakistan Petroleum Ltd (PPL) in Sui. The gunmen overpowered the guards and damaged pipelines and a purification plant. Gunmen also Kidnapped 10 employees of the Water and Power Development Authority (APDA), Pakistan’s main water and power utility. The attacks disrupted gas and power production as well work in fertilizer and chemical plants.

Many in the region believe that the recent attacks in Balochistan province are meant to sabotage the pipeline project as well as other projects connecting Sui gas installations with the Turkmenistan gas fields. If true, these pipeline attacks are unsettling and will raise to the surface India's concerns about the reliability of the project. The possibility of sabotage of the proposed Iran-India pipeline by militant groups in Pakistan is becoming increasingly feasible as terrorists learn from their allies in Iraq about the strategic gain in conducting a sustained sabotage campaign against oil infrastructure. This is especially true after last month’s exhortation by Osama bin Ladin to his cohorts to target oil pipelines in the Persian Gulf. In the next few weeks India will have to make a final determination if it wants to join the pipeline project. If Pakistan truly wants India to share the burden of the project it should demonstrate to Delhi that it can ensure security and stability along the pipeline route.

Pakistan's President Pervez Musharraf warned the Baloch tribesmen to stop their violence, threatening to use force: "Don't push us... it is not the 1970s, and this time you won't even know what has hit you," he said, referring to a crackdown in the 1970s on separatists in the area. As we have seen in other parts of the world where pipelines are under attack, ending the onslaught may well prove to be mission impossible. Nevertheless Islamabad has already indicated that the pipeline project will be pursued even were India to decide not to join.

Gal Luft is Executive Director of the Institute for the Analysis of Global Security.