Govt approves draft of TAPI gas pipeline agreement

Participating countries expected to sign accord by next month.

ISLAMABAD: The government has approved a draft of gas sale purchase agreement for the US-backed Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and also endorsed the gas price at 70% of crude price, which is cheaper than the gas to be purchased from Iran.

The approval was given here on Thursday in a meeting of the Economic Coordination Committee (ECC) of the cabinet, headed by Finance Minister Dr Abdul Hafeez Shaikh.

The move will pave the way for signing the GSPA agreement by next month. Earlier, the agreement was to be inked on April 19 but it was deferred due to upcoming talks between Afghanistan, Pakistan and India on transit fee.

US is pushing Pakistan to sign the $7.6 billion TAPI gas pipeline agreement, which will provide 3.2 billion cubic feet of gas per day, and has threatened to impose sanctions if it does not abandon the Iran project.

TAPI gas price has been worked out at 70% of Brent crude price, which is 8% cheaper than Iranian gas, according to petroleum ministry documents. Pakistan and Turkmenistan will share risks to the gas pipeline passing through Afghanistan, said the petroleum ministry. The turmoil in Afghanistan is a major risk to the project.

Urea import

In an effort to cope with gas shortage that undermines the performance of fertiliser plants, ECC decided to import 300,000 tons of urea for meeting requirements of the Kharif crop season that began on
April 1.

The imports will cost the national exchequer Rs7.8 billion as the government provides a subsidy of Rs1,304 per 50kg bag to keep imported urea prices closer to rates of domestic produce. An imported urea bag costs Rs2,904 while the government sells it at Rs1,600, absorbing Rs1,304 in the form of subsidy.

The Ministry of Industries had sought permission for import of 600,000 tons on the assumption that gas supply to fertiliser plants would be completely stopped. For urea import, the government will get a $100 million loan from Saudi Arabia and a $21 million grant from Japan. In the previous Rabi season, 1.2 million tons of urea was imported.

Body to discuss guidelines on gas import

ECC also approved in principle a proposal to amend policy guidelines on liquefied petroleum gas (LPG) air mix, compressed natural gas (CNG) or liquefied natural gas (LNG) distribution projects.

However, it constituted a sub-committee to further deliberate on the economic cost as well as impact on final consumer price before implementing the policy to mix imported gas with local produce. The committee will prepare recommendations for consideration of ECC.

No new gas connections

ECC turned down a summary of the petroleum ministry, seeking financial relief for completing gas supply schemes initiated under the prime minister’s directives or under parliamentarians’ schemes. The refusal came in the backdrop of a decision taken in the recently-held energy conference, which slapped a blanket ban on new gas connections due to gas shortage.

In 2008, the government increased the cost of gas connections to Rs54,000 from Rs20,000 for Punjab and Sindh, from Rs40,000 to Rs108,000 for Khyber-Pakhtunkhwa and from Rs100,000 to Rs270,000 for Balochistan.

The petroleum ministry pleaded that either old rates should be restored or the government should provide soft loans to gas utility companies as these were unable to bear the additional burden.

Published in The Express Tribune, April 13^th, 2012.