Turkmenistan continues search for investment in TAPI

By bne IntelliNews May 6, 2013

bne -

Turkmenistan is persevering with efforts to persuade an international oil major to join the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, according to reports in India, despite being unwilling to give up a stake in its gas fields to potential investors.

A series of road shows in New York, London and Singapore in the autumn, aimed at attracting international oil and gas companies to the project, ended in failure, even though companies including Chevron, Exxon Mobil, BP, BG Group, RWE and Petronas attended. That disappointment flew in the face of claims from Turkmen officials that they had all expressed an interest in the project, which carry gas from the secretive Central Asian state via Afghanistan to the Indian sub-continent.

Ashgabat's refusal to allow participating companies to take a stake in the Turkmen hydrocarbons fields that would fill the pipeline has been cited as the main reason for the flop, although the continuing instability in Afghanistan is another factor.

India's Economic Times cites an unnamed Indian government official as saying that, as the four participating countries prepare for a meeting on May 15, Turkmen officials continue trying to persuade an unnamed international oil major to take part. "Our understanding is that [Turkmenistan is] quietly working with international oil companies to work a way around the question of upstream stake," the official said.

However, he also noted that the ban on sales of stakes in Turkmen fields to foreign buyers remains a sticking point. "They have told us that they have passed a law after the Chinese were given a stake and this now does not allow them to give a stake to anybody else in the gas fields," the official said. It's unclear to which deal he was exactly referring.

Ashgabat is secretive over its agreements in the oil and gas sector. In 2007, China's CNPC was given the right to develop the Bagtyyarlyk gas field, which supplies the Central Asia-China (CAC) gas pipeline exporting to China. However, the level of access Bejing enjoys to the Galkynysh (previously South Yolotan) gas field remains unknown after the Chinese State Development Bank pledged $4.1bn to help develop it in 2010. On the one hand, it's thought Turkmenistan may have signed over a stake. Other speculation suggests Ashgabat has offered no more than a firm commitment that CAC is filled.

Either way, India is clearly pushing for a similar level of security. It has been pushing for an equity stake in the massive Galkynysh for itself, to ensure supply issues do not compromise the massive financial commitment needed to build TAPI. Indian officials say that since CNPC has been given access to upstream assets in Turkmenistan, India's state owned GAIL should have the same privilege.

At the same time, the four states participating in TAPI have maintain that they aim to start construction of the pipeline, which has support from the Asian Development Bank, by the end of 2013. However, on top of the jockeying between themselves, they are trying to drum up support from international oil companies to invest in the project, which may cost as much as $12bn.

Agreements on the price of gas exports to Afghanistan, India and Pakistan have already been signed. In September, the four participating governments agreed to proposal from Turkmenistan to set up a company with shared capital of $20m to carry out a feasibility study and design the pipeline.

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