A peace pipe or an explosive mix?
18 Oct 2012 4:38 AM IST
With the Chinese and the Russian companies opting out of the road shows for attracting foreign companies to the Turkmenistan-Afghanistan-Pakistan-India [TAPI] gas pipeline project, the way is cleared for the American oil majors to take full control of the construction of the ambitious TAPI gas pipeline project which is being strongly backed by the US government.
According to Indian sources, at the latest round of discussions, member countries decided to have minority stake in the consortium to be set up for the project and they favoured that this consortium be led by one or even two major global company. Since the global majors interested in the project include Chevron, ExxonMobil, Shell, BP, BG, Petronas and RWE, there are indications that one US major will emerge finally as the leader of the consortium as both the Asian Development Bank and the US government are interested in one of the US majors to lead the project consortium. Indian sources are disappointed at the non-participation of any Russian company, especially the Gazprom in the road shows. They feel that the Russian major with wide experience would have been a good counterweight to the American presence in the consortium.
The road shows have been held so far in Singapore, New York and London for both project construction and financing. The companies which participated for financing included Deutsche Bank, Morgan Stanley, US Exim bank, Citigroup and Macquarie Bank, apart from India’s leading bank State Bank of India.
The decision with regard to the consortium leader and investors, which will be made jointly by member-countries in consultation with the Asian Development Bank [ADB], is expected to be completed in a year’s time. The work on network is expected to start in 2015.
Turkmenistan’s South Yolotan-Osman gas-field is the source for the TAPI pipeline. In fact, the gas source has also attracted the likes of ExxonMobil and Chevron for upstream participation. However, the Turkmen authorities have made it clear that no equity participation in the upstream development of this giant field, recently renamed Galkynysh, could be considered.
The authorities will offer service contracts for this purpose. In a ‘service contract’, payment is made in accordance with the services rendered. However, the company rendering such services is not entitled to any share in oil/gas in that block. According to Indian sources, pipeline building and operation are, in themselves, an economically viable proposition. The estimated $7.6-billion, 1,680-km pipeline [144 km in Turkmenistan, 735 km in Afghanistan and 800 km in Pakistan] project will have the capacity to transport 90 mscmd of gas – 38 mscmd each for India and Pakistan and the remaining 14 mscmd for Afghanistan.
The pipeline is expected to be operational in 2018 and supply gas over a 30-year period. The member-countries of the project have agreed to a uniform transit fee of 49.5 cent. The fee is also for the security of the pipeline network. The transit fee is crucial as, invariably, the country at the tail-end of the project – in this case, India – ends up paying the most. The transportation charges will be finalised when the project is implemented by the consortium nominated and all costs are known. Rough estimates show that the Turkmenistan gas may cost around $13/mBtu at landfall point in India.
Impressive as the reserves are, security analysts are more concerned over the length of the pipeline. It will run along 144 kms in Turkmenistan, 735 kms in Afghanistan and 800 kms in Pakistan. It is pertinent to note that much of the hilly terrain in Afghanistan and Pakistan remains very tenuously administered, if at all.
The Taliban and an assorted number of mutually warring tribes led by local warlords, some hostile to Kabul and Islamabad, rule the roost. Keeping the pipeline secure in such conditions may prove a Herculean task for any government or official agency.
The US and EU countries are keen to see the completion of the project, ensuring a steady power supply to Afghanistan, with their troops pullout to begin shortly. Their objective is also to reduce the importance of Iran and Russia as major players in the existing energy scenario in the region. Under US pressure, India has reduced its oil imports from Iran and voted against its neighbour on certain issues at the UN, whereas Pakistan and other countries have abstained.
As things stand, Afghanistan is set to earn $18 billion for the passage of the pipeline through its territory, ensuring maintenance and proper security and meeting its own energy shortfall. The country is poised to see a growth in job creation and employment, as its economy gets a much-needed boost.
However, concerns are mounting as experts ponder the ground situation in Afghanistan and the tribal frontier areas of Pakistan, once the US and European troops complete their proposed pullout by 2014. Following their initial setbacks and defeats, the Taliban forces have found their feet and remain a major threat to the West-backed Afghan regime. They continue to carry out attacks at impunity against Pakistan army units when armed clashes occur, organise hit and run raids and sabotages regularly.
Most observers agree that the influence of the Taliban remain at all levels in Afghanistan, not to mention the tribal parts of Pakistan. Given this backdrop, the present Karzai-headed administration remains weak and indecisive. Its future looks uncertain in the post-withdrawal situation. Post-Soviet withdrawal in Afghanistan, the pro-Russian government lasted for three years, but no one thinks the present rulers of Kabul will last that long on their own against a resurgent Taliban.
The pipeline construction schedule can only be maintained if the Talibans cooperate with the US companies in continuing the project work. Much will depend on the relationship between the future government in Afghanistan and the US administration. [IPA]
According to Indian sources, at the latest round of discussions, member countries decided to have minority stake in the consortium to be set up for the project and they favoured that this consortium be led by one or even two major global company. Since the global majors interested in the project include Chevron, ExxonMobil, Shell, BP, BG, Petronas and RWE, there are indications that one US major will emerge finally as the leader of the consortium as both the Asian Development Bank and the US government are interested in one of the US majors to lead the project consortium. Indian sources are disappointed at the non-participation of any Russian company, especially the Gazprom in the road shows. They feel that the Russian major with wide experience would have been a good counterweight to the American presence in the consortium.
The road shows have been held so far in Singapore, New York and London for both project construction and financing. The companies which participated for financing included Deutsche Bank, Morgan Stanley, US Exim bank, Citigroup and Macquarie Bank, apart from India’s leading bank State Bank of India.
The decision with regard to the consortium leader and investors, which will be made jointly by member-countries in consultation with the Asian Development Bank [ADB], is expected to be completed in a year’s time. The work on network is expected to start in 2015.
Turkmenistan’s South Yolotan-Osman gas-field is the source for the TAPI pipeline. In fact, the gas source has also attracted the likes of ExxonMobil and Chevron for upstream participation. However, the Turkmen authorities have made it clear that no equity participation in the upstream development of this giant field, recently renamed Galkynysh, could be considered.
The authorities will offer service contracts for this purpose. In a ‘service contract’, payment is made in accordance with the services rendered. However, the company rendering such services is not entitled to any share in oil/gas in that block. According to Indian sources, pipeline building and operation are, in themselves, an economically viable proposition. The estimated $7.6-billion, 1,680-km pipeline [144 km in Turkmenistan, 735 km in Afghanistan and 800 km in Pakistan] project will have the capacity to transport 90 mscmd of gas – 38 mscmd each for India and Pakistan and the remaining 14 mscmd for Afghanistan.
The pipeline is expected to be operational in 2018 and supply gas over a 30-year period. The member-countries of the project have agreed to a uniform transit fee of 49.5 cent. The fee is also for the security of the pipeline network. The transit fee is crucial as, invariably, the country at the tail-end of the project – in this case, India – ends up paying the most. The transportation charges will be finalised when the project is implemented by the consortium nominated and all costs are known. Rough estimates show that the Turkmenistan gas may cost around $13/mBtu at landfall point in India.
Impressive as the reserves are, security analysts are more concerned over the length of the pipeline. It will run along 144 kms in Turkmenistan, 735 kms in Afghanistan and 800 kms in Pakistan. It is pertinent to note that much of the hilly terrain in Afghanistan and Pakistan remains very tenuously administered, if at all.
The Taliban and an assorted number of mutually warring tribes led by local warlords, some hostile to Kabul and Islamabad, rule the roost. Keeping the pipeline secure in such conditions may prove a Herculean task for any government or official agency.
The US and EU countries are keen to see the completion of the project, ensuring a steady power supply to Afghanistan, with their troops pullout to begin shortly. Their objective is also to reduce the importance of Iran and Russia as major players in the existing energy scenario in the region. Under US pressure, India has reduced its oil imports from Iran and voted against its neighbour on certain issues at the UN, whereas Pakistan and other countries have abstained.
As things stand, Afghanistan is set to earn $18 billion for the passage of the pipeline through its territory, ensuring maintenance and proper security and meeting its own energy shortfall. The country is poised to see a growth in job creation and employment, as its economy gets a much-needed boost.
However, concerns are mounting as experts ponder the ground situation in Afghanistan and the tribal frontier areas of Pakistan, once the US and European troops complete their proposed pullout by 2014. Following their initial setbacks and defeats, the Taliban forces have found their feet and remain a major threat to the West-backed Afghan regime. They continue to carry out attacks at impunity against Pakistan army units when armed clashes occur, organise hit and run raids and sabotages regularly.
Most observers agree that the influence of the Taliban remain at all levels in Afghanistan, not to mention the tribal parts of Pakistan. Given this backdrop, the present Karzai-headed administration remains weak and indecisive. Its future looks uncertain in the post-withdrawal situation. Post-Soviet withdrawal in Afghanistan, the pro-Russian government lasted for three years, but no one thinks the present rulers of Kabul will last that long on their own against a resurgent Taliban.
The pipeline construction schedule can only be maintained if the Talibans cooperate with the US companies in continuing the project work. Much will depend on the relationship between the future government in Afghanistan and the US administration. [IPA]
Next Story
