Four countries ink deal for $10 billion TAPI gas pipeline project

Will lead to $200m investment in TAPI company, finalisation of route in Afghanistan

ISLAMABAD:

The four nations that are part of the $10-billion Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project have signed an initial investment agreement, a move that will clear the way for updating the feasibility study and finalising the pipeline route in Afghanistan.

The agreement was inked by representatives of the four nations and the Tapi Pipeline Project Company in Istanbul last month.



They had already registered the company in November 2014 in which Afghanistan, Pakistan and India would have 5% shareholding each and the remaining 85% stake would be held by Turkmenistan.

The investment agreement pertains to the 5% shareholding of each of the three gas-importing countries, which means an initial investment of around $200 million.

“We have initialed an investment agreement in Istanbul and the final deal will be signed soon,” Interstate Gas Systems Managing Director Mobin Saulat told The Express Tribune.

Pakistan would contribute 5% of the financing for different activities of the project, he said.

Leaders of the four countries performed the groundbreaking of Tapi pipeline in December last year, a scheme aimed at easing the energy deficit in South Asia.

The Tapi pipeline, also dubbed the peace pipeline, is expected to bring peace and stability in the region in the wake of regional cooperation as Afghanistan, Pakistan and India will be depending on each other. It will also connect South Asia and Central Asia.

“We are currently working on three pipelines including a liquefied natural gas (LNG) pipeline from Gwadar, Tapi and the North-South LNG pipeline,” Saulat said, adding the Tapi project was expected to be completed by the end of 2019.



He said Pakistan was facing gas shortages and the project would help ease energy crisis in the country.

The government is working on three gas import programmes which will bring about 4 billion cubic feet of gas per day (bcfd). This includes 1.325 bcfd from Tapi, about 750 million cubic feet per day (mmcfd) from the Iran-Pakistan pipeline and about 2 bcfd from LNG imports.

At present, Pakistan produces 4 bcfd of gas against demand for 6 bcfd. For bridging the shortfall, the government has signed a long-term LNG deal with Qatar. First vessel under the agreement reached Pakistan earlier this week.

Turkmenistan will make an investment of around $25 billion to deliver around 3.2 bcfd of gas to three energy-hungry countries - Afghanistan, Pakistan and India - by December 2019 for 25 years.

Of the total, $15 billion will be poured into developing the gas field whereas $10 billion will be spent on laying a 1,680km-long pipeline.

A gas sales and purchase agreement had been signed in 2013 that set the pricing mechanism under which gas price at the Turkmenistan border would be around 20% lower than the Brent crude price.

At the present rate of crude oil, the Tapi gas will cost around $3.2 per million British thermal units, which will rise to $6.5 per unit after including the tolling tariff and transit fee to be paid to Afghanistan.

Afghanistan is estimated to receive about $500-600 million in transit fee from Pakistan and India and will ensure security of the pipeline. India will also pay about $250 million in transit fee to Pakistan.



Pakistan and India will each receive 1.325 bcfd of gas while Afghanistan’s share has been set at 500 mmcfd, which will also be up for grabs either by Islamabad or Delhi if Kabul does not need it.

Turkmenistan is expected to achieve financial close for the project by December 2016 for developing the gas field and constructing the pipeline in three years - by December 2019.

Published in The Express Tribune, March 4^th, 2016.

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