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    Posted on 21 May 2012
    OPINION  
    Tridivesh Maini Manish Vaid

    TAPI: What’s in the pipeline?

    By Tridivesh Maini & Manish Vaid


    LATER THIS week, Gas Authority of India Ltd (GAIL) will be signing a Gas Sale and Purchase Agreement (GSPA) with Turkmen Gas, Turkmenistan’s national oil company, at an estimated cost of $7.6 billion (Rs 38,000 crore) for the Turkmenistan-Afghanistan- Pakistan-India pipeline. Turkmenistan, from where the pipeline begins, has the world’s fourth largest natural gas reserves, after Russia, Iran and Qatar.

    Of the total of 1,680 km, 144 km will be in Turkmenistan, 735 km in Afghanistan, and 800 km in Pakistan, bringing it to the India border. Of the 90 million standard cubic metres per day (mscmd) of gas that will be pumped through it, India and Pakistan will get 38 mscmd each and Afghanistan the remaining 14 mscmd. Turkmen gas is expected to be less than $11 per mBtu at a prevailing crude oil price of $100 per barrel. The pipeline is expected to be operational by 2016.

    The gas for the pipeline will be sourced from proven gas field of Galkynysh (earlier South Yolotan Osman) also known as Dauletabad gas field in Turkmenistan, completing its run at the Indian border town of Fazilka, following a route of Yolotan-Osman, Guspi (Turkmenistan), Herat, Lashkar Gah, Kandahar (Afghanistan), and Quetta, GG Khan, Multan, Pakpatan (Pakistan).

    It is important to note that this pipeline is not merely about economics. Geo-political concerns have played a crucial role in pushing the project, especially the deteriorating US-Iran relationship, amongst others. Two US companies, viz, Chevron and Exxon Mobil, have evinced keen interest. The US hopes that New Delhi will scuttle the IPI (Iran-Pakistan-India) pipeline. Commenting on the TAPI and IPI, E Ahamed, Minister of State for External Affairs, emphatically stated, “This does not mean that we are ignoring our ties with Iran, a country we need for our energy security. TAPI was the project we have been negotiating for long. We are continuing our negotiations and engagement with Iran for bettering our relations.”

    For Afghanistan, this pipeline is expected to be a critical source of employment and revenue generation, apart from contributing to the country’s energy security — an important US objective. In fact, the transit revenue itself could be around $300 million per year. In addition, the pipeline would also provide gas for industrial units.

    Third, the project would further improve the relationship between India and Pakistan which has gained some momentum as a consequence of sustained economic engagement over the past year. Since both countries have high stakes in TAPI, the project could be yet another catalyst in cementing the relationship between the two South Asian neighbours.

    Fourth, the TAPI project has already been termed as an important component of the ‘New Silk Route’ project between Central Asia and South Asia — something the US is pushing for — by former petroleum minister Murli Deora during his December 2010 visit in Ashgabat, citing rapid economic growth for all participating countries.

    If one were to look at the pipeline purely from an Indian perspective, there are numerous benefits. First, being a party to the consortium, India is actually in a position to negotiate transportation tariff and will also be able to monitor project costs. Second, India is likely to pay $10 per mmbtu, including $3 for transportation charges and transit fees.

    It would be cheaper than some long-term contracts and certainly cheaper from spot prices for which India pays around $16 per mmbtu.

    THIRD, ONE of the important post-project benefits for India would be a spurt in volume of cheaper gas as compared to lng. 38 mmscmd of India’s share of gas is likely to be more than that of Reliance Industries Ltd (RIL) by 2016-17.RIL’s gas output is expected to drop to 20 mmscmd in 2014-15. It is quite likely that it may fall further in following years.

    Interestingly, the first commercial shale gas is also likely to be produced by 2016- 17. With holding 6.1 trillion cubic feet of technically recoverable share gas reserves in three basins, India is regarded to be a novice in shale gas production. But the good news is that by 2016-17, India would have enough regasified LNG (R-LNG) terminals to mitigate risk of disruption. These facilities would include floating regassification units.

    In spite of all the above-mentioned benefits of the project, there are some concerns, mainly over the sensitive geopolitics of the region. A lot of hope rests on the TAPI, which is why there will be a lot of speculation until the project moves beyond being ‘in the pipeline’.

    Tridivesh Singh Maini is an Associate Fellow with The Observer Research Foundation, New Delhi

    Manish Vaid is a Research Assistant with Observer Research Foundation, New Delhi


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    Posted on 21 May 2012
 

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