Aziz said that work on key project issues, including financing, had already started and tariffs were under discussion. 'Tariffs are on the table and being negotiated,' Aziz said. 'The project's bottom line has to make sense. The financial and technical parts are being worked on. All of us have world-class financial advisers and there has been lots of equity interest from Gulf investors.'

The latest round of talks was held between Iranian deputy oil minister Mohammed-Hadi Nejad Aziz and Pakistan's petroleum secretary Ahmed Waqar on 21 May in Islamabad. They were joined by an Indian delegation made up of Gas Authority of India (Gail), Indian Oil Corporation (IOC) and Petroleum & Natural Gas Ministry officials on 23 May. India will submit a new proposed gas tariff by the end of August, according to former ministry adviser Talmiz Ahmed.

Aziz said that Pakistan's recent economic growth of 6-8 per cent was driving energy demand in the country. 'We are already buying electricity from Iran,' Aziz said. 'But gas is what we need to fuel our growth and India is also very keen to join.' Gas demand is also rising in India and will reach about 16,000 million-18,000 million cubic feet a day (cf/d) by 2025 from 3,200 million cf/d now. Ernst & Young is the financial consultant to the Indian government on the project. The UK office of Austria's ILF Consulting is the technical adviser and has completed a prefeasibility study (MEED 23:9:05, see Iran).

The planned 2,700-kilometre IPI pipeline is facing

strong opposition from Washington, which is concerned about Iran's nuclear enrichment programme. New Delhi wants political guarantees from Islamabad to ensure uninterrupted gas supplies.

Aziz said that Pakistan had also made a proposal to build a pipeline to transport imported gas or crude from its Arabian Sea coast to western China. Gas could be pumped from the planned new LNG facilities, for which developers and investors were asked by Pakistan's Sui Southern Gas Company (SSGC) to register their interest by 22 May.

The project calls for the construction of an LNG import terminal with capacity of 3.5 million tonnes a year. First imports are targeted for 2010 under an offtake gas sales agreement of at least 20 years.