The TAPI Pipeline: Coming close to reality

Decks have been cleared for the much touted and long awaited TAPI gas pipeline project that would bring gas from Turkmenistan to India and Pakistan. The ambitious $10 billion project, which has had a checkered past, has gained momentum particularly after the visit of Indian Prime Minister Narendra Modi to Turkmenistan in July and more recently in October by External Affairs minister Sushma Swaraj to work out the nitty-gritty of the project.

The project that would help India move towards energy security is no doubt fraught with several concerns as it passes through Afghanistan and Pakistan where several terrorist groups are active. TAPI – Turkmenistan, Afghanistan, Pakistan, India, expected to bring abundantly available Turkmen gas from its massive gas fields in Dauletabad and Galkynysh, is now expected to start work next month.

Swaraj during her stopover visit to Ashgabat on way to Moscow last month, held follow up talks with her Turkmen counterpart Rashid Meredov on some of the critical issues with regard to the pipeline for which concrete steps were worked out for starting of the project. Following the talks TurkmenGaz was selected as the TAPI pipeline consortium leader. Last year, gas companies of Turkmenistan, Afghanistan, Pakistan, and India established a company that will build, own and operate the planned 1,800-kilometre TAPI natural gas pipeline. Gas Authority of India (GAIL) will have 10 per cent stake in the four-nation project. The project will have unique safety features to segregate portions in the event of a terror attack.

Turkmenistan’s state-owned Turkmen Gaz will lead the consortium with at least 51 per cent stake in the project. Turkmenistan will put in an investment at least $3 billion as equity. Gail’s exact equity is being worked out but it is expected to be around $300 million. An international consortium may be roped in course of time. 

The Asian Development Bank (ADB) is transactional advisor to TAPI gas pipeline project. ADB is also assisting in zeroing in on the consortium to implement one of the largest energy projects with a design capacity of 33 billion cubic metres of natural gas per year. The pipeline will extend from Galkynysh field in Turkmenistan through the Afghan cities of Herat and Kandahar to its final point at a settlement on the Pakistan-Indian border.

Experts believe that TAPI is not only a regional project envisaging the transportation of Turkmen gas, but also a global project that will provide an opportunity to contribute to the stabilisation of Afghanistan. Its implementation could contribute to the rehabilitation process in the post-war country as it will create job opportunities and provide Afghanistan with guaranteed income from the transit.

Turkmenistan, which is rich with hydrocarbon reserves, is one of the key players on the energy market in the resource-rich Caspian region. The Central Asian state has the world's fourth largest natural gas reserves after Russia, Iran, and Qatar. It produces about 70-80 billion cubic metres of gas.

French giant Total SA had earlier shown interest in leading the consortium but backed out after Turkmenistan refused to accept its condition of a stake in the gas field that would feed the pipeline. Now preparatory work is underway in Turkmenistan to start construction work on the project in December as the government is taking up 200 km stretch of the pipeline within Turkmenistan on the basis of its government programme for development of gas and oil industry within the country. The global consortium will join as and when it is finalised. Currently this work is to be carried out by the specialists from the Institute of Oil and Gas of Turkmengaz state concern. Turkmengaz will be consortium leader as of now and this is seen as a major breakthrough as it has paved the way for starting the much delayed project, which was once written off as a non starter.

This construction will be part of the overall TAPI pipeline. The entire project is to become operational by 2018. India and Pakistan would get 38 mmscmd each while the remaining 14 mmscmd will be supplied to Afghanistan. In India the project will end at Fazilka in Punjab from where the gas pipeline network will be extended within the country.During comprehensive talks between Modi and Turkmenistan President Gurbanguly Berdymukhammedov both sides felt TAPI project would have transformational impact on trade between the two countries, PM Modi said the possibility of land-sea route through Iran for the pipeline should also be explored.

In the past several oil giants like Chevron, EXXON, BP apart from Total showed interest. The project will now have $4 billion as equity, $6 billion as debt and host countries will ensure security for that part of the pipeline passing through their territory.

A good beginning has been made for the launch of project but for the gas to flow and become a marketable commodity is dependent on terrorism in Afghanistan and Pakistan being reined-in and this is going to be a nightmarish task. Turkmenistan won’t take on the headache of what goes on beyond its boundary. Afghanistan and Pakistan don’t have the money to even consider part-financing the $10 billion project. And it would make little sense for India to sink that kind of money in such an uncertain security scenario. That investment can only come from a deep-pocketed company based out of one of the permanent members of the UN Security Council holding veto power.

However, equity participation from all the four countries, can provide a degree of assurance that the gas would reach its destination. But the consortium leader would want significant collateral to recover its funding should the pipeline go into force majeure as a result of a terrorist attack. With global support to fight terrorism, the project if implemented overtime, will give a boost to economic development of the region.