ADB offers $1b loan for TAPI gas pipeline

Transnational gas pipeline has been described as strategic project

Zafar Bhutta November 19, 2016
Transnational gas pipeline has been described as strategic project. PHOTO: FILE

ISLAMABAD: In a major development, the Asian Development Bank (ADB) has offered a $1 billion loan to finance the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project that will go a long way in meeting energy needs of the three countries, The Express Tribune has learnt from an official of the Ministry of Petroleum and Natural Resources.

The official said the ADB had worked as transaction adviser for the project and at that time it was not willing to finance the project due to ‘conflict of interests’. Now that its role as transaction adviser has ended, it offered $1 billion in financing for the Tapi pipeline project.

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

Talking to The Express Tribune, Mobin Saulat, the managing-director of the Interstate Gas Systems Private Ltd — the Pakistani company responsible for the import of gas into Pakistan via the project —confirmed that the ADB had offered financial assistance, but he did not reveal the exact amount.

The US has been supporting the project to meet the energy needs of Afghanistan, Pakistan and India. This is a regional energy infrastructure project and would help ease tensions between the neighbouring countries due to inter-dependence, an official said.

Turkmenistan has huge gas reserves and a major chunk of its gas goes to Russia that also supplies gas onwards to Europe. Turkmenistan has also been supplying gas to Iran. Afghanistan, Pakistan and India would be new gas markets for Ashgabat.

“The US is backing this project as it wants to divert gas supply of Turkmenistan from Russia to Afghanistan, Pakistan and India, the official said, adding this was a strategic project.

Moreover, the Islamic Development Bank (IDB) has offered $500 million in loans to finance the project.

Islamic Development Bank offers $500m for TAPI pipeline

Turkmenistan will contribute 85% of the pipeline cost estimated at $10 billion, whereas Afghanistan, Pakistan and India will have a 5% share each in investments. The cost is in addition to $15 billion capital injection required for developing a gas field from where Turkmenistan will supply gas to the three countries.

Of the 85% cost, Turkmenistan will provide 51% of funds and the remaining 34% will be arranged by different financiers. “The three gas consumers could also enhance their investment share if desired,” the official said. Giving reasons for the ADB’s offer, he said the bank is influenced by Japan, adding the movement comes after field development work was awarded to a consortium of Japanese companies, which will explore gas against a service fee, but will not have any shareholding in the field.

On the other hand, the pipeline laying requires a huge quantity of pipeline material as well as compressors. “The government of Turkmenistan has finalised a plan to conduct road-shows in the UAE, Singapore and London in an effort to raise financing for engineering, procurement and construction phases of the Tapi pipeline project,” said a senior government official.

'TAPI pipeline to be completed by 2019'

China has emerged as a leading player in laying the pipeline in Turkmenistan. A Chinese company will build the pipeline over an area of 300 kilometres in the Central Asian state.

“Pipeline contracts in Afghanistan and Pakistan will be awarded by the Tapi Company, which has been set up by the project stakeholders,” the official said.

The company will run and maintain the pipeline whereas Pakistan, Afghanistan and India will pay a tolling fee.

Published in The Express Tribune, November 19th, 2016.



Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ