Clare Nuttall in Almaty -
Turkmenistan and Pakistan yesterday signed a gas pricing agreement for the planned TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipeline. The bilateral Gas Sales and Purchase Agreement sets the price of Turkmen gas to be delivered through the pipeline at 70% of the price of crude oil on the international market.
Turkmenistan's President Gurbanguly Berdymukhamedov and Pakistani Prime Minister Yousaf Raza Gillani also agreed to speed up efforts to construct the $7.5bn pipeline, which was originally proposed in the mid-1990s.
TAPI will run from Turkmenistan's South Yolotan gas field via Afghanistan, to Multan in Pakistan, then on to Fazilka in northwest India. It is planned that Pakistan and India would each receive 1.365 billion cubic feet of gas (38.6 million cubic metres) per day. Afghanistan will mainly serve as a transit state - and receive a substantial payment - but it will also receive 0.5 billion cubic feet of gas a day.
For its part, Turkmenistan has been keen to diversify its export routes, and especially since relations with Russia, which previously offered practically the only major gas link, cooled. That happened in April 2009, when Gazprom suddenly halted imports from Turkmenistan, with Ashgabat accusing the Russian company of causing a blowout in the main export pipeline with its actions.
Not long before, the Central Asia-China pipeline opened in December 2008, and is fed mainly with gas from Turkmenistan. Ashgabat has been looking to the south Asian markets of India and Pakistan, where demand for oil and gas is rising due to their fast growing populations and economies, for some time also, but concrete progress has been slow.
Whilst a firm date for the start of construction work on the TAPI pipeline has not yet been decided, when the Gas Pipeline Framework Agreement between the four participants was signed in 2008, there were plans to start construction in 2010 and to start pumping gas by 2015. Another agreement was signed in Ashgabat in December 2010, but this did not include any specific provisions on security, or on gas volumes or pricing.
Lengthy delays have resulted in a steady increase in the forecast cost of the project. Back in the 1990s, it was expected to cost $3.3bn; current forecasts are more than double that level at $7.6bn, largely due to the worsening security situation along the planned route.
Andrew Neff, senior energy analyst at IHS Global Insight, points out that whereas Turkmenistan faces political hurdles in pushing ahead with a trans-Caspian pipeline, there are operational hurdles for TAPI, namely security in Afghanistan. "Arguably, the political hurdles are more easily overcome then the operational ones, given the state of Afghanistan security environment now, despite 10 years of Western involvement and a demonstrable push (and big political and economic incentives) to improve the situation on the ground," Neff told bne.
Almost half the pipeline will run through Afghanistan, which is still far from stable. There are problems with security in parts of Pakistan, and relations between Pakistan and India are troubled.
However, the project has had the backing of the Asian Development Bank since its inception, and the US and other western countries back TAPI mainly because it excludes Iran,.
Russia has also claimed it supports the pipeline. Speaking at the Shanghai Cooperation Organization summit in St Petersberg on November 7, Prime Minister Vladimir Putin said it was "time to move forward" on both TAPI and the CASA-1000 electricity export project.
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