TAPI Continues To Face Challenges

I have recently written about TAPI, the 1,680 km (1,000 mile) $7.6 billion Turkmenistan-Afghanistan-Pakistan-India proposed pipeline scheduled for completion in 2016 with a capacity to transfer 90 million cubic meters of gas per day to energy starved South Asia. According to the TAPI agreement, Turkmenistan will supply 38 mmcmd each going to Pakistan and India, and the rest to Afghanistan. The project is backed by the U.S. as it would stabilize the region and deliver urgently needed energy while at the same time allowing Turkmenistan to earn around $300 million per annum in transit fees, open Central Asian countries to alternate markets in the east and thereby lessen their dependence on Russia and its pipelines.

There have been a few recent developments on the project. Last week, multilateral ministerial-level TAPI meetings took place in New Delhi, mostly concerning issues of security, gas pricing and transit fees. Indian newspaper the Hindu reports that the participants could not reach an agreement on the price of the fuel and the transit fee remained unresolved.

Both India and Pakistan did not agree to the price of gas proposed by Turkmenistan. Indian Natural Gas Minister Jaipal Reddy said that pricing has yet to be discussed, “no deliberation on price was held at this state because it is a bilateral issue.” Turkmenistan has proposed that supplies be benchmarked to LNG (gas in ships or liquefied natural gas) that costs more than natural gas, while India and Pakistan are opposed to this and have suggested a common price. There was also a disagreement on the transit fee that India has to pay to Pakistan and Afghanistan for gas transit.

The Indian Minister also expressed his misgivings over the safety of the pipeline that is proposed to go through volatile regions of Afghanistan (Herat, Helmand and Kandahar) and Pakistan (Baluchistan). “As a buyer and being at the tail end of the project, India has concerns relating to safety of the pipeline and safe transit of gas through Afghanistan and Pakistan. Quite obviously, our goal is not merely the construction of the pipeline but also continuous and uninterrupted flow of Turkmen natural gas over several decades,” Mr. Reddy said. It is important to add that on the other hand, Pakistan has stated that it is confident about the security of TAPI.

The ministers will meet on May 13-14 in Kabul to iron out the issue of transit and other fees after which a price will be discussed in June at Ashgabat, capital of Turkmenistan. The four countries have set a deadline of July 31 for signing the Gas Sales Purchase Agreement (GSPA).

As I have written in my previous post on TAPI, I think it is going to be pretty remarkable for the project to come to fruition because of the many complex issues and moving parts involved. Shebonti Ray Dadwal writing for the Diplomat nicely lays out the challenges facing the pipeline. First, its route crosses some of the most dangerous and volatile regions in the world. Second, serious concerns remain regarding Turkmenistan’s ability to pump out the amount of gas it is promising in addition to its inadequate infrastructure. Finally, the price dispute between India and Turkmenistan remains a serious issue. I like Mr. Dadwal’s TAPI juxtaposition with the BTC (Baku, Tbilisi, Cheyhan pipeline). The project seemed almost impossible, but because of the strong backing from the U.S. it materialized rather quickly. Perhaps the same circumstances are in store for TAPI.