TAPI Gas Pipeline Agreement: Future Perfect : Civil Services Mentor Magazine July 2012

TAPI Gas Pipeline Agreement: Future Perfect

India, Pakistan, Afghanistan and Turkmenistan, inked the historic gas sale purchase agreement (GSPA) for the $7.6- billion Turkmenistan-Afghanistan- Pakistan-India (TAPI) gas pipeline, in a step that is likely to boost peace and give new shape to regional energy cooperation,often touted as the peace pipeline. The 1,680 km pipeline to become operational by 2018. The U.S. has, for almost 20 years, supported the plan to pipe natural gas over 1,100 miles from Turkmenistan via Afghanistan to Pakistan and India, commonly known as the TAPI pipeline. But the  project was delayed because of the Taliban insurgency in Afghanistan and commercial disagreements between the partners. The TAPI pipeline will have a capacity to car ry 90 million metric standard cubic metres a day (mmscmd) of gas for a 30-year period and is likely to become operational by 2018. Last week, the Union Cabinet gave its nod to the signing of GSPA and also approved the payment of 50 cents per million metric British thermal unit (mmBtu) as the transit fee to Pakistan and Afghanistan for the gas. India and Pakistan would get 38 mmscmd each, while the remaining 14 mmscmd will be supplied to Afghanistan.

Turkmenistan, which holds more than 4 per cent of the world’s natural gas reserves, signed agreements to sell gas to India and Pakistan through the 1,680 km pipeline at the Caspian Sea resort of Avaza in Turkmenistan, according to a statement issued. For India, the agreement was signed by GAIL (India) Chairman B. C. Tirpathi in the presence of Petroleum and Natural Gas Minister Jaipal Reddy who described the signing of the GSPA as “no ordinary event” and a triumph of multilateralism, regional cooperation and economic integration. The contract price of TAPI gas is linked to a formula which contains indices based on fuel  basket and other indices which are not as volatile as crude oil. The formula is similar to the ones used in international contracts. The U.S. is backing the pipeline as an alternative to the India-Pakistan- Iran (IPI) pipeline that has been stalled for quite  some time now due to U.S. pressure on India and Pakistan not to go ahead with the project. The pipeline will run from the Turkmenistan gas fields to Afghanistan. It will start from the Dauletabad gas fields and run into Afghanistan alongside the highway running from Heart to Kandahar and then via Quetta and Multan in  Pakistan. The final destination of the pipeline will be Fazilka near the India-Pakistan border.

“Without a doubt, the economic benefits of the TAPI gas pipeline will be immense for our energy-starved economies. The flow of natural gas will bring in industrial and economic development in our countries,” Mr. Reddy said. “It is our belief that the TAPI gas pipeline will transform the politics of this region.” Hopefully, the spin-off benefits of this pipeline will encourage us to emphasise trade and investment issues over contentious political issues and enable us to build trust and confidence among ourselves as neighbours and partners in progress,” he said. The Turkmenistan, Afghanistan, Pakistan and India (TAPI) pipeline offers benefit to all four participating countries and has the  potential to enhance regional cooperation. While congratulating the people of Turkmenistan, Afghanistan, Pakistan and India and applauding the efforts of the union cabinet of India in clearing the $7.6 billion gas pipeline project, a lot of satisfaction on buoyant attitude of all governments concerned in their resolve to complete and implement the project in record time. Turkmenistan, which currently exports gas only to Russia, will have alternatives for exporting its energy recourses, Pakistan and India will be able to use Turkmen gas to address to their current energy deficits. In addition, the potential extension of the TAPI pipeline towards Pakistan’s port at Gwadar would enable the Pakistani government to export gas and generate added revenues.

Regionally, the planning, execution and operation of the TAPI pipeline will provide new business opportunities for the gas and engineering industry, and it would foster regional connectivity among three important member nations of South Asia - Afghanistan, India and Pakistan. Turkmenistan would make available a great amount of natural gas each year to Pakistan. This gas would be sold at a price, which is based on the prevailing price of crude oil at the time. Afghan government would further benefit by transit fees it earns on the project when implemented. Pakistan and India would benefit best interim of getting 38 million standard cubic metres per day of gas each. All in all TAPI pipeline poses significant potential for improving energy security across South Asia, for providing the transit governments with a new source of revenue and for fur thering regional integration. All the four countries involved have the will to realise the project overcoming challenges related to pricing, gas certification, technical capacity, funding and security, which have previously held up progress on this critical piece of energy infrastructure. According to The Wall Street Journal, despite security concerns, the countries involved have continued to push forward. According to the paper, the project will offer US a way to further isolate Iran, which is trying to build its own gas pipeline to Pakistan. It also could help deepen economic ties between India and Pakistan, countries that Washington wants to see cooperate more to help forge stability in the region, particular ly Afghanistan.


But while the deal has revived hopes for the much-delayed project that would supply Pakistan, India, and Afghanistan with Turkmen gas, many obstacles remain. Regional instability has long haunted the Turkmenistan, Afghanistan, Pakistan, and India (TAPI) project, first conceived 18 years ago, and that remains the main obstacle to the pipeline becoming a reality. The planned route of the 1,800- kilometer pipeline would wind through 735 kilometers of southern and western Afghanistan — hotbeds of the Taliban insurgency in the country. Now, with NATO leaders this week describing the transition of security oversight to Afghanistan as “irreversible,” questions over the country’s ability to maintain peace on its own loom large. This casts a pall over the prospects of building a multibilliondollar pipeline in some of the county’s most volatile regions. The pipeline will also pass through Pakistan’s southwestern Balochistan Province, where thousands have died in separatist and sectarian violence during the past nine years. Off icials in Islamabad say the government has wisely diverted the pipeline through the province’s relatively stable northern Pashtun regions, but the pipeline could still be vulnerable to sabotage. Poorly guarded gas pipelines have been a favorite target of ethnic Baluch separatists fighting against the Pakistani military.

The TAPI gas pipeline project is believed to have suf fered negative impacts due to political issues between Washington, Iran and Pakistan. Pakistan is using the TAPI project to put pressures on Kabul and Washington. Pakistan’s main conditions according to Afghan official sources include an end to Durand Line and Baluchistan issues and long term financial support of Washington to Islamabad. In the meantime an official source in the ministry of petroleum of Pakistan quoting Afghan officials has said that Afghanistan has agreed to hand over around 700 million cubic meters of gas to India and Pakistan, which is gained by Afghanistan while TAPI gas pipeline project is implemented. The project was expected to start during the current year. According to Afghan officials, the length of the TAPI gas pipeline is around 1,735 kilometers and 735 kilometers of the TAPI gas pipeline is due to cross Afghanistan.

Saqib Sherani, a former adviser to Pakistan’s Finance Ministry, says the construction of the pipeline could also be hampered by regional and global rivalries. While India and Pakistan are now looking to boost trade ties, the two have fought several wars and are still involved in simmering border conflicts. An unexpected rupture in their relations could easily put TAPI on the back burner once again. The Asian Development Bank has dubbed TAPI the “peace pipeline,” and has provided a few million dollars in technical assistance, but more — much more money is needed. As costs rise, the financing problem grows — estimated in 2008 to cost $7.6 billion, the project is now estimated to cost up to $12 billion. Some U.S. officials have hinted that major energy companies might be interested in financing the project, but it is doubtful. Very few investors will be eager to finance a pipeline going through an unstable Afghanistan.

Conclusively it can be said, Regionally, the planning, execution and operation of the TAPI pipeline will provide new business opportunities for the gas and engineering industry, and it would foster regional connectivity among three important member nations of South Asia - Afghanistan, India and Pakistan. “Without a doubt, the economic benefits of the TAPI gas pipeline will be immense for our energy-starved economies.

Raghav Mishra