On February 23, almost two years after its groundbreaking in Turkmenistan, Turkmen President Gurbanguly Berdimukhamedov, Afghan President Ashraf Ghani, Pakistani Prime Minister Shahid Khaqan Abbasi and Indian Minister of State for External Affairs M. J. Akbar launched construction work on the Afghan section of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project in Herat. ‘’TAPI will lead from a gas pipeline into an energy and communication corridor, underpinning development of road, rail and communication networks’’, Mr. Abbasi said. Interconnectivity of regional economies and support of their growth were highlighted as prime goals of the US in the message of the State Department’s spokesperson Heather Nauert, who congratulated the four states on the occasion of the ceremony. Indeed, the pipeline is hoped to boost regional trade and cooperation, as well as regional peace in a particularly unstable geographic and political corner of the globe, without mentioning its impact on long-term energy security and economic benefits for the countries involved, in the form of gas sale revenues (Turkmenistan) and transit fees (Afghanistan, Pakistan). 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.
Even though the Taliban issued a statement on the day TAPI officially entered Afghan territory, assuring that ‘’there will be no delay in this important national project’’, Afghanistan’s deteriorating internal security situation remains of particular concern with regard to possible impediment of the pipeline progress, given its biggest portion will cross southwestern Afghanistan, a major Taliban bastion. It should be noted that the Taliban was the very first negotiators with American Unocal on the building of a pipeline across Afghanistan back in the late nineties (talks finally failed). But today it is certain hardline commanders of the group, controlling several areas through which the pipeline runs, like the Kandahar-Herat highway, that oppose the project and appear capable of attacking construction sites, in defiance of the more positive stance towards TAPI maintained by the central leadership, who eyes a share in the up to $1bn of annual transit duties, promised by the Turkmen MFA in November. Despite US administration’s pledge for increased military assistance to Afghan forces, readiness of the Western-backed government in Kabul to fight the continuously fragmented Taliban and other insurgent factions in the country’s western and southern provinces (both accused of liaisons with Tehran) is still called into question, a fact that could cause serious setbacks to TAPI realization.
Economic inducements have lately given new impetus to the project, mainly driven by Turkmenistan and Pakistan. The holder of the world’s fourth-largest gas reserves has greatly invested into TAPI in order to diversify its eastward export routes away from China, who is expected to double annual imports of Turkmen gas up to over 60BCM/a by 2020. This goal gains further importance against the backdrop of Gazprom’s 2016 decision to stop purchasing gas from Turkmenistan, prompting a sharp decline in the country’s hard currency revenue. Still, it is rather improbable for Turkmenistan to overcome its critical economic predicament, even in case of an on-schedule commissioning of the pipeline by 2020. As for Pakistan, it welcomes any new interstate project, with the aim of finding a solution to its major energy shortage problem, and appears willing for relevant cooperation even with the neighbor and arch-foe India. Incremental Pakistani demand for gas is also covered by cheaper LNG contracts, so far signed with Qatar LNG and Eni. Those cheaper rates have prompted the country to request from Turkmengaz a review of the gas pricing formula for TAPI, pursuant to which gas prices are linked with Japan crude cocktail at 64% of its value.
As natural gas obtains a firmer foothold in Southeastern Asia, principally impelled by industrial demand growth (led by fertilizers) in countries like India, Pakistan and Bangladesh, TAPI pipeline will not lose allure for partners, who wish to reach financial close this year. However, notwithstanding loan and technical advice offered by various development banks, with the most recent funding granted by the Saudi Fund for Development (SFD), it seems unlikely that adequate financing for the construction cost of the whole project has been ensured to date, creating cause for further adjournment of pipeline laying operations outside of Turkmenistan.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-march-1-2018/#3
Comments