India to bypass Bangladesh while building pipeline

Aug 02, 2006 02:00 AM

India will bypass Bangladesh while building a proposed gas pipeline from Myanmar after Dhaka set tough terms for the project to pass through its soil, tripling its estimated cost, Indian officials said.
The pipeline will now pass through India's north-eastern states, inflating its estimated cost to $ 3 bn due to the longer distance, they said. Indian state firms have begun survey work, although they have yet to secure a gas import deal with Myanmar, which is also considering sales to China and Thailand.

Negotiations on the gas deal with Myanmar had picked up pace, the officials said, but added that a timeframe could not be set to conclude an import agreement. India plans to import gas from two offshore blocks, with Indian state energy firms owning 30 % in each block. The new pipeline route is expected to cover a distance of 1,400 km (870 miles), the officials added.
India's rapidly growing economy -- Asia's third-largest -- has witnessed energy demand soar. But it imports 70 % of its crude oil and produces barely half the gas it consumes. New Delhi, as a result, has been aggressively pursuing plans to build transnational gas pipelines and is also seeking foreign oil assets to feed demand.

This is the second setback for Bangladesh in its dealings with neighbouring India. Indian conglomerate Tata in July suspended work on a $ 3 bn investment plan in Bangladesh because of delays by Bangladeshi authorities. Besides the project in Myanmar -- which says it has the world's tenth-biggest gas reserves estimated at more than 90 tcf -- New Delhi is also planning gas pipelines from Iran and Turkmenistan.
India, Myanmar and Bangladesh signed a trilateral agreement early last year to build the 290-km (180-mile) pipeline for New Delhi's first such international project. If the plan had gone ahead, Bangladesh had expected to get about $ 350 mm in investment and to earn $ 100 mm in annual transmission fees.

Bangladesh also expected to get another $ 100 mm as one-off right of way charges from theproject and $ 25 mm each year for sharing management. Although security concerns dogged the project, the bilateral conditions set by Dhaka proved to be deal breakers, a senior Indian diplomat said.
Security would remain a worry as parts of India's north-eastern region are troubled by long-running insurgencies by ethnic and tribal rebels demanding more autonomy or freedom from India, the diplomat said. India and Bangladesh traditionally share friendly ties but New Delhi's $ 1 bn trade surplus, frequent border clashes and charges that Dhaka hosts anti-Indian militants have led to distrust between the South Asian neighbours.

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