Turkmenistan close to gas deal on TAPI pipeline

Oil&Gas Materials 21 May 2012 13:08 (UTC +04:00)

Turkmenistan plans this week to sign a long-awaited agreement to supply natural gas to Pakistan and India through an ambitious U.S.-backed pipeline that would cross Afghanistan, a source in the Central Asian country's government told Reuters on Monday.

Turkmenistan, which holds more than 4 percent of the world's natural gas reserves, plans to sign the sales and purchase agreement for the TAPI pipeline on Wednesday, during an international gas conference in the Caspian Sea resort of Avaza.

"The plan is to sign the TAPI natural gas sales and purchase agreement with Islamabad and Delhi on May 23 in Avaza, by the Caspian, where the gas congress is opening," the government source said, on condition of anonymity.

He gave no details of the content of the agreement.

The idea of the TAPI pipeline, an acronym formed from the initials of the four countries through which it would pass, was first raised in the mid-1990s but construction has yet to begin.

In a sign a deal might be imminent, India's cabinet last week allowed state-run gas-firm GAIL (India) Ltd to sign a gas purchase agreement with Turkmenistan.

Turkmen officials have said the proposed 1,735-km (1,085-mile) pipeline could carry 1 trillion cubic metres of gas over a 30-year period, or 33 billion cubic metres a year.

But the route, particularly the 735-km (450-mile) leg through the Afghan provinces of Herat and Kandahar, presents significant security challenges and will require billions of dollars in funding.

A U.S. official estimated in March that the pipeline could cost between $10 billion and $12 billion to construct.

Daniel Stein, senior adviser to the U.S. State Department's special envoy for Eurasian energy, also said that two major U.S. oil companies were interesting in participating in the project. He declined to name the companies.

Ex-Soviet Turkmenistan is promoting the TAPI pipeline as a key element in plans to cut reliance on supplies to Russia and to boost annual gas exports to 180 billion cubic metres by 2030.

BP data show Turkmenistan's natural gas reserves equal to those of Saudi Arabia and behind only Russia, Iran and Qatar.

The country aims to supply gas from its Galkynysh field, better known by its previous name, South Iolotan. Auditor Gaffney, Cline & Associates has ranked the field the world's second largest, with gas reserves of between 13.1 trillion and 21.2 trillion cubic metres.

Turkmenistan's unflinching policy of selling gas at its own borders means Pakistan and India would need to settle volumes, price and transit fees with each other and with Afghanistan.

The Indian government said in a statement on May 17 that the pipeline would be operational in 2018. India and Pakistan would each get 38 million cubic metres per day (mcmd) of gas, while the remaining 14 mcmd would be supplied to Afghanistan, it said.
Indian Petroleum Minister S. Jaipal Reddy is scheduled to lead his country's delegation to Turkmenistan to sign the agreement. India has nominated GAIL for the purchase of gas.

Separately, an Indian Oil Ministry official said last week that the transit fee for the gas had been fixed at about 50 cents per million British thermal units (mmBtu).

India, Asia's third largest oil consumer, imports about 80 percent of its oil needs while falling local gas output has forced it to buy costly liquefied natural gas.

"We expect that India will more than double gas consumption over the next 25 years," Ulrich Benterbusch, director of the Global Energy Dialogue at the International Energy Agency, told an international energy conference in Uzbekistan last week.

"Domestic gas production in India will not be able to keep up," he said.