ISLAMABAD/ KARACHI: As Turkmenistan targets to achieve financial close of a multibillion-dollar transnational gas pipeline project in November this year, Pakistan needs to expedite work on its part of the pipeline to ensure energy security.
Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project will work as an energy corridor and connect Central and South Asian regions.
Background discussions with officials and experts revealed that the most important part of the project was to kick off construction work on Pakistan's side as it would diversify sources of energy supply.
Turkmenistan has injected billions of dollars from its own resources to develop the gas field from where gas will be supplied and is also trying to generate funds from financial institutions like the Asian Development Bank (ADB). It is also working to generate funds on the credit supplier model.
Total volume of investment is estimated at around $25 billion that includes development of the gas field and building the pipeline from Turkmenistan to Afghanistan, Pakistan and India.
The cost of developing the gas field is estimated at $15 billion while pipeline laying will cost $10 billion. Turkmenistan will bear 85% of the total cost whereas 15% of the cost will be borne by all the other participating countries - Pakistan, Afghanistan and India.
"Turkmenistan is hoping to sign loan agreements with prospective financiers in October this year in order to generate funds to kick off construction work on first phase of the project," a senior government official said.
Tapi project is aimed at bringing gas from the Galkynysh and adjacent gas fields in Turkmenistan to Afghanistan, Pakistan and India. A gas sale and purchase agreement (GSPA) between Inter State Gas Systems (ISGS) and Turkmengaz for the supply of 1.3 billion cubic feet of gas per day (bcfd) to Pakistan was signed in 2012, wherein the pricing was agreed with Turkmengaz.
Gas price review
With the slump in global prices, the government is planning to review the gas price under the Tapi pipeline project.
As the energy scenario evolves over these years, the competitiveness of the gas price under GSPA, agreed to seven years ago, needs to be revisited based on the current energy scenario and to determine the viability of the project.
Turkmenistan has agreed to review the gas price. The government has formed a price negotiating committee, headed by the petroleum secretary. The committee will negotiate the gas price with Turkmengaz.
Though security in Balochistan has improved, experts say Pakistan should take measures to improve the security further on the route of the pipeline.
If Pakistan was unable to take necessary precautionary measures in Balochistan or made any delay, it could lead to a change in Turkmenistan's policy and it may decide to supply gas to Europe, not to Asia, they said, adding that Tapi was a strategic project that could help Pakistan to strengthen cooperation with Turkmenistan.
The North-South Pipeline is another strategically important project that is suffering delay due to the sanctions imposed by the US on Russian companies.
Pakistan and Russia signed a government-to-government deal in October 2015 to construct the North-South liquefied natural gas (LNG) pipeline.
Pakistan nominated ISGS whereas Russia designated RT Global for building the pipeline. However, the project could not take off due to US sanctions on RT Global. In January this year, Russia and Pakistan signed a protocol to replace the project company.
Published in The Express Tribune, April 18th, 2020.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ