India urged to join trans-Afghanistan gas pipeline project

Feb 23, 2003 01:00 AM

Turkmenistan, Afghanistan and Pakistan (TAP) have signed a protocol for trans-Afghanistan Gas Pipeline Project, while urging India to join the project to make it economically viable. The decision was formally announced after the fourth steering committee meeting of three participating countries of the $ 3.5 bn TAP gas project and the Asian Development Bank (ADB), which was scheduled to complete feasibility study by September 2003.
Chaudhry Naurez Shakoor, Pakistan’s Minister for Petroleum and Natural Resources, Yully Qurbanmuradov, Deputy Prime Minister and Tagive Techberdi Minister for Petroleum of Turkmenistan and Afghan Mines and Industries Minister Juma Mohammad Mohammadi announced the decisions taken in the meeting. "All the three participating countries and the ADB have decided to request India to join in," said Naurez Shakoor. He said official request would be sent to the Indian government shortly.

The meeting also decided to conduct gas demand studies in Pakistan and India, to be completed by March 2003, and reserve capacity survey in Turkmenistan, to be done by June 2003, as part of the project preparation. It was also decided to build strategic gas reserves, both in Pakistan and India, to meet any eventuality or disruptions in supply due to security situation of the region.
However, much would depend on response of the Indian government for this mega infrastructure project. If the Indian government agrees to the proposal, it is possible that India formally attends the next steering committee meeting of the TAP stakeholders on April 8-9, 2003 in Manila at the ADB headquarters.
"Since the viability of the project depends upon the extension of the pipeline project to India, it was agreed during the steering committee meeting that the parties acting jointly would forward the documents of the TAP to the government of India, inviting it to join the project," an official statement said.

In case of Indian apprehensions shown over Iran-India gas pipeline project, and refusal to accept land route via Pakistan, Secretary Petroleum Abdullah Yousaf said: "There were three options for Iran-India gas pipeline project: overland; shallow waters; and, deep sea. India preferred the deep-sea route, but it is not possible technically, and not feasible financially."
Now Russian energy giant Gazprom is conducting a study for laying Iranian gas pipeline through shallow waters inside Pakistani sea belt. In economic terms, it would be better for India to participate in the TAP project. Pakistan would claim royalty, both for Iran and Turkmenistan pipes, if it passes through its territory.

The steering committee also considered the technical and commercial aspects relating to the route, construction and operation of the project, said Naurez Shakoor. He said there were two considerations, as far as the route was concerned. The first choice was from Dauletabad, Turkmenistan through southern Afghanistan before entering Pakistan, and second was through north of the rigid and hostile Afghan terrain.
In Pakistan, the pipeline destination would be either Gwadar to Multan or Peshawar to Lahore (before crossing to India) depending on the Afghan route, and willingness of the Indian government. There were some reports that the Northern Alliance used its clout in the Afghan administration to formally request the TAP stakeholders to consider the other route as well. "There are some advantages and some disadvantages in both the routes. We have just made a request to conduct a study as to which one would suit better," said Afghan Minister Mohammadi.

The first choice route when the project was originally conceived some 10-year ago was through south of Afghanistan -- an area under strong control of then Taliban government.
However, since the American-backed domination of the Northern Alliance in Kabul, things have changed. The government in Kabul had little or no writ in areas outside Kabul. However, the Afghan minister insisted that Kabul would ensure security for laying, operation and maintenance of theambitious project.

The ADB had recently proposed a multilateral arrangement, including participation of all the member states. Turkmenistan, Afghanistan and Pakistan had signed a trilateral framework agreement for laying pipeline infrastructure in Ashgabat on December 27, 2002. The Bank had approved $ 1 mm for the feasibility study of the project.
However, some recent reports had indicated that the United States was willing to police the pipeline infrastructure through permanent stationing of its troops in the region. The US ExImBank, the Trade and Development Agency (TDA) and the Overseas Private Insurance Corporation (OPIC) had also sown readiness to finance such a project, if leading American energy giants come forward.

In the mid-90s, leading US company Unocal was courting the Taliban regime to lay 1,600 km long Trans-Caspian gas pipeline from Dauletabad, Turkmenistan to Multan in Pakistan. A consortium led by Unocal, including Delta of Saudi Arabia, Itochu of Japan, Inpex of Japan, Hyundai of South Korea and Crescent of Pakistan even discussed the modalities and financing arrangement for this $ 2.5 bn project.
The Centgas (Central Asia Gas) project was supposed to pump 700 bn cf per year gas through 870 miles long pipes network to Pakistan and another 400 miles to India. Another part of this project was crude oil export pipeline from Chardzhou, Turkmenistan via Afghanistan to a terminal on the Pakistani Arabian Sea coast, with a capacity of 1 mm bpd. Similarly, an oil pipeline from Kazakhstan to Gwadar was proposed. However, the Taliban factor forced the investors to suspend this project in April 1998.

The pipeline infrastructure was supposed to transit through 700 km of war-torn Afghan territory. Such projects were being seen as most economical and commercially viable, as oil and gas fields of Turkmenistan and Uzbekistan portions of the Amu Darya basin, and Kumkol field in central Kazakhstan, could be connected to the Central Asian Oil Pipeline Project.
Leading US companies had also been working on transporting the Central Asian oil and gas to Europe via Turkey, where energy demand was high. In this regard, Baku-Tbilisi-Ceyhan pipeline for oil producers of Azerbaijan, Kazakhstan, Georgia, Turkmenistan and Russia was a central piece.

As far as gas demand of Pakistan was concerned, the existing 23 tn cf gas reserves were depleting. On the current consumption estimates, they would last only for 22 years. The known oil reserves at 650 barrels were just enough for 15 years. The main reliance of the country was on imported crude oil and diesel.
The situation in India was more difficult as shortage of energy supplies and relatively expensive fuel options were hampering its growth potential. At the steering committee meeting, the Bank and the participating countries decided that India should be formally explained these benefits and should be offered whatever guarantees it required to join the project.

There was a notion that since many American firms were keen on joining the project, this factor would make India realise that whatever security considerations it might had could be taken care of by the presence of the US OPIC political guarantees and participation of the multilateral agencies like the ADB and the World Bank, which would doubly ensure the sustainability over long-term basis.
"Matters relating to formation of consortium comprising international oil and gas companies as well as banks and government’s guarantees also came under discussion. The steering committee also discussed various risks involved and its mitigation requirements," the official statement added.

At the end of the meeting, participating countries signed a joint protocol that set a timeframe for completion of pre-qualification document for formulation of consortium, which was as under:
1 -- First draft by end March 2003;
2 -- Issued to oil and gas companies by April 2003;
3 -- Submission of Qualifications by July 2003; and
4 -- Shortlisting of Parties by August 2003.

Source: INDOlink
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