Price deal?: Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline


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TAPI price deal close
By Robert M Cutler 

MONTREAL – Great anticipation surrounds next week’s meeting on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline project, as press reports from all sides suggest the possibility of a final agreement on transit fees. 

The 1,735 kilometer pipeline would run from southeastern Turkmenistan into Afghanistan, then parallel to the highway from Herat to Kandahar and finally via Quetta and Multan in Pakistan to the town of Fazilka in India. Pakistan and India would receive 13-14 billion cubic meters per year (bcm/y) of gas while Afghanistan’s take would be 5 bcm/y. 

The deal would have a lifespan of 30 years and require roughly one trillion cubic meters of Turkmenistan’s gas. Originally planned to be sourced from Dauletabad, the gas will instead, according to Turkmenistan’s President Gurbanguly Berdimuhamedow, come from the massive South Yolotan fields that the British auditing firm Gaffney Kline confirms to hold between 13.1 and 21.2 trillion cubic meters. 

The cost of construction has been estimated at US$7.6 billion, of which one-third would be financed by the Asian Development Bank, which has sponsored meetings among the various sides over the years. 

The four countries concerned signed a framework inter-governmental agreement in December 2010 that provided for three bilateral negotiations, between Turkmenistan and each of the other participating countries, over price and transit issues. While giving a certain advantage to Turkmenistan, this arrangement turned out operationally to be impractical because of the need for Afghanistan-Pakistan and Afghanistan-India transit fees to be in accord with one another. 

Disagreements arose and negotiations became complicated until January this year, when in a breakthrough Pakistan and India agreed at the ministerial level that the two countries plus Afghanistan had to agree a uniform tariff among themselves. 

It is the formula to fix such a uniform transit fee that has been under negotiation since then, which all sides have been publicly seeking to accelerate and holding more than monthly meetings to achieve. Notably, Pakistan and India have also agreed in principle to explore jointly the opportunities in Turkmenistan’s upstream oil sector. 

Various numbers concerning the price agreement have been bruited in the sub-continent’s press although these leaks must always been taken with a grain of salt. Nevertheless, the usually reliable Indian press in particular indicates that New Delhi has been doing everything possible to promote the price agreement. 

Indian Petroleum Ministry officials have confirmed to the Indian press that India will sign the Gas Sales and Purchase Agreement (GSPA) as soon as the cabinet approves the note prepared for its action. This confirmation comes after conflicting reports in the press during the last two weeks of April over whether the tariff levels for final price agreement had been agreed among the sides or not. 

The TAPI project has gained this appearance of momentum as the Iran-Pakistan natural gas pipeline project looks to be on its last legs. This latter project is the remnant of the Iran-Pakistan-India (IPI) so-called “peace pipeline” that foundered after New Delhi pulled out of talks with Tehran over exasperation with its continual attempts to reopen closed chapters of the negotiation and failure to respect agreements already reached, particularly over price and terms of delivery. 

The putative Iran-Pakistan natural gas pipeline would be sourced from the South Pars field and run over 1,100 km from Iran’s Assalouyeh Energy Zone in the south of the country through Iranshahr before crossing the border with Pakistan. Construction costs were estimated in 2009 at $7.4 billion. Initial capacity of 22 bcm/y seems, however, just as improbable as the cited possible final-stage volume of 55 bcm/y, which according to Iranian officials would anyway be contingent on Pakistan’s doubling at its own expense the pipeline to be laid inside Iran. 

Three years ago, a tentative accord set the price for Iran’s gas to Pakistan at a figure that would vary between $260 and $485 per thousand cubic meters, as a function of the average price of Japanese customs-cleared (JCC, nicknamed “Japan Crude Cocktail”) oil imports. However, even if the project is somehow kick-started, prices will have to be renegotiated, as Tehran’s new propositions are unrealistic and unaffordable. 

Further complicating the Iran-Pakistan pipeline is the fact that even the approximate route within Pakistan is far from defined. A consultant to the German company ILF, tasked with executing a feasibility study for Islamabad, has confirmed to the press that the Pakistani government has neither the finances nor the necessary technology to realize its side of the project. 

Reports continue meanwhile to accumulate that the Russian firm Gazprom is seriously rethinking its participation in the implementation of the project, specifically the furnishing of critical industrial technology such as compressor stations, and the Industrial and Commercial Bank of China has pulled out from funding the project. 

Even Pakistan’s own Oil and Gas Development Corporation and the National Bank of Pakistan withdrew from the project earlier this year, citing adverse implications for their foreign partnerships and businesses. 

Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields. 

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

http://www.atimes.com/atimes/Central_Asia/NE18Ag01.html

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