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Lower oil prices lead to greater cooperation on energy

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The G20 nations have enjoyed the benefits arising from oil price volatility, but it’s clear that international partnerships remain a vital aspect of every nation’s energy policy

The collapse of oil prices that began 18 months ago has prompted a considerable shift in the fortunes of many G20 nations and the way they are approaching their energy needs.

Importers such as India and Pakistan have enjoyed an almost unprecedented boon as prices plunged, with their economies enjoying growth surges and increased investment across many sectors. Yet while the future of oil prices remains uncertain, those same countries are acutely aware that the short-term profits from low-cost energy should be turned into tangible benefits over the long term.

For Pakistan, the oil price drop has come in tandem with Iran’s historic nuclear deal with the US, which looks likely to help develop the Asian nation’s relationship with Tehran. In turn, that is set to ensure further infrastructure investment to provide a cheaper and more sustainable supply of energy.

“Taking into account that the cheapest way of transporting gas is through pipelines and that we have a neighbour and a near neighbour (Iran and Turkmenistan, respectively) who have the largest gas reserves of the world, this represents a great advantage to Pakistan,” says Shahid Khaqan Abbasi, Pakistan’s Minister for Petroleum and Natural Resources.

His country has already forged a commitment to build a pipeline with Iran to deliver gas quickly and efficiently across the border, while two further projects are being developed that will allow gas to flow from Turkmenistan into India as well.

“In addition, the petroleum impulse of Iran and its possible lower price can be a big benefit for Pakistan because of the low transportation cost,” Mr. Abbasi adds. “Moreover, by being a neighbour we become a more preferable market. So, instead of shipping long distances, Iran would ship short distances when it comes to Pakistan.

“We currently import oil mainly from Singapore, Oman and Dubai. We import about six million tons of petrol a year, so the relationship with Iran could be very beneficial. I think that trading with neighbours is the easiest way of trading; consequently we’re very positive about this situation and we’re certain that it will open a lot of investment opportunities.”

Certainly Pakistan has been the centre of investor attention over recent months, with Japanese investors moving into coal-based energy projects while Russian and Korean firms are exploring infrastructure and energy sectors. The China-Pakistan Economic Corridor is also enabling companies to cement closer ties and historically low interest rates are also encouraging foreign direct investment inflows.

Indeed, forging closer links with other international players has become a vital play for many G20 nations looking to secure energy supplies and such partnerships are coming from perhaps surprising places.

To view the full article from Worldfolio, please click here.