Turkmenistan has extended an invitation to Azerbaijan requesting the participation of its neighboring country in the implementation of Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, a vital infrastructure element in the context of Turkmenistan’s eastward export diversification strategy. The Turkmen interest in Baku’s cooperation regarding TAPI was expressed last Thursday (Mar 15) during a briefing by Turkmenistan’s ambassador to Azerbaijan Mekan Ishangulyev, who noted that the transnational project will promote social and economic development in the region. The 1.814km TAPI will cover 214km, starting from the giant Galkynysh onshore gas deposit, before reaching the Turkmen-Afghan border. In Afghanistan, it will traverse 774km through the provinces of Herat, Farah, Helmand, Nimroz, and Kandahar. The 826km-long route within Pakistan will pass near Quetta, the provincial capital of Baluchistan, and Multan in the province of Punjab, finally reaching India at Fazilka. Its cost and capacity are estimated at $10bn and 33BCM, respectively. Under a 30-year sales and purchase agreement, Turkmengaz is going to allot 5BCM/a of natural gas to Afghanistan. Pakistan and India, where natural gas demand is predicted to rise by 50% until 2030, are going to receive 14BCM/a each.
For his part, the more Western-oriented Azerbaijan has in the past years been actively involved in the financing and construction of another extensive pipe network, the Southern Gas Corridor (SGC), intended to enduringly enhance gas-supply security of the EU, as most of its gas has by now been contracted by Turkey and European member-states up to 2045. According to a report published last week by Fitch, SGC’s net financing needs for operations and capex will be close to $2.2bn in 2018-2019, taking into account proceeds from the operation of Shah Deniz project and South Caucasus Pipeline (SCP). The agency, that affirmed SGC company’s senior unsecured Eurobonds’ long-term rating at BB+, also said it expected the approval of more loans by development institutions for the project segments (South Caucasus Pipeline Expansion: SCPX, Trans Anatolian Pipeline: TANAP, Trans Adriatic Pipeline: TAP).
Meanwhile, with its participation in the SGC via the proposed Trans Caspian Gas Pipeline (TCGP) stuck in perpetual deliberations with EU representatives due to the unsettled legal status of the Caspian Sea, Turkmenistan has concentrated on finding financial sources and allies in the materialization of TAPI amidst security concerns, related to the reception of the project by the Taliban and Islamic State factions in the territory of Afghanistan, as well as objections against the gas tariff rate, principally raised by Pakistan. Following a financing agreement with the Saudi Fund for Development (SFD) for the purchase of gas pipes for the Turkmen section of TAPI, Turkmenistan’s President Gurbanguly Berdimuhamedov has continued the search to attract more Middle Eastern funding for the pipeline. In the course of his official visit to the United Arab Emirates (UAE) last week, he invited local companies and financial entities to support TAPI’s second construction phase in Afghanistan. After all, UAE firms have long been present in the Turkmen energy market. Dragon Oil, one of the largest international investors in Turkmenistan, holds the right to develop oil and gas reserves contained in Block II in the Turkmen section of the Caspian Sea, under a 1999 production sharing agreement (PSA). Furthermore, back in 2013, Petrofac completed a major service project on the development of Galkynysh in Turkmenistan's Mary province.
With all the above in mind, what good would Azerbaijan’s engagement in TAPI have to bring for both countries? In this case, the key lies in Azerbaijan’s traditionally propitious relations with ‘’strategic partner’’ Pakistan and ‘’brotherly’’ Afghanistan, to quote public statements by various Azerbaijani government officials. Thanks to the particular conviviality, Azerbaijan could to a certain extent contribute to the uninterrupted progress of TAPI. But in order to secure Azerbaijani collaboration, Ashgabat will have to base its future foreign policy choices on a friendlier approach towards its Caspian neighbor. For instance, it will need to work towards achieving common ground with Baku as for their territorial dispute over the Kyapaz/Serdar offshore oilfield, one of the major stumbling rocks to the TCGP’s go-ahead. Reactivation of its partnership with Armenia, as Yerevan has been seeking new markets for trading and energy cooperation since the government reshuffle of 2016, could also make it hard for Turkmenistan to pursue an effective resurgence of its energy ties with Baku to the benefit of TAPI.
Partially available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-march-21-2018/#4
Comments