TAPI pipeline project: Countries reach agreement on gas price

Officials to meet on May 30; will discuss transit fee and gas specification.

ISLAMABAD:

The countries that will be buying gas under the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project put aside their differences over gas pricing formula and have reached an understanding on paying cost of gas, including profit,  as proposed by Pakistan and finalised three options relating to transit fee to be nominated in a four-day meeting beginning May 30 this year in Manila.

Earlier, India wanted to link gas price with coal, being a big user. But India has now agreed with Pakistan to pay cost of gas, including profit, to seller Turkmenistan.

Under the estimated $7.5 billion Tapi gas pipeline project, Pakistan’s share will be 1.35 billion cubic feet per day (cbfd) out of total 3.2 (bcfd) gas imports. Inter-Governmental Agreement (IGA) and Gas Pipeline Framework Agreement (GSFA) have already been signed and four participating countries have targeted to sign Gas Sales Purchase Agreement (GSPA) by July 31 this year.

Sources told The Express Tribune that buyer countries - Pakistan, Afghanistan and India held a two-day meeting from May 17 to 18 in Afghanistan to finalise modalities on the gas pricing issue and transit fee to import gas from Turkmenistan, under the multi-billion dollar project.

“During the meeting, the Pakistani side proposed that other buyer countries including Afghanistan and India pay cost of gas including profit to Turkmenistan that has been endorsed,” a spokesperson from the Ministry of Petroleum Zafar Iqbal Qadir said.

He said that this formula would be nominated in the upcoming meeting. “In a meeting to be held in Manila, gas pricing, transit fee and gas specification will be discussed with the seller, Turkmenistan,” Qadir added.

Sources said that during a meeting held in Afghanistan, three options relating to transit fee of gas were discussed.

The first discussed that the amount of transit fee should be fixed on transmission of gas from Turkmenistan. The second suggested linking transit fee with per kilometer length of gas pipeline, and the third considered linking transit fee with volume of gas to be consumed by each country. Under this formula, these countries would pay greater amounts, on account of transit fee over using more gas.

During talks held in February in Islamabad, Pakistan had proposed keeping ‘uniform’ prices of imported gas, excluding transportation charges and transit fee for all countries, including Afghanistan and India.

Turkmenistan wanted to link gas price with Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG) or crude oil. It proposed to link base price of gas equal to LNG landed in Pakistan, to be adjusted after every three months at the Turkmenistan border meeting in April 2007. Pakistan and India had not agreed to  the proposed formula.

Published in The Express Tribune, May 21^st, 2011.