TAPI pipeline construction: US firms lose out; French, Malaysian could win race

Energy ministers to meet next week to discuss multi-billion-dollar contract.

Zafar Bhutta November 10, 2014


Officials of Turkmenistan, Afghanistan, Pakistan and India will meet next week in Ashgabat to discuss the possibility of awarding a multi-billion-dollar construction contract for a transnational gas pipeline that will meet critical energy needs of three countries.

French and Malaysian companies are in the race to win the lucrative contract as top energy firms of the US – Chevron and ExxonMobil – have dropped out following rejection of their demand for an equity stake in the project.

According to sources, the steering committee of the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project will meet in Turkmenistan capital, Ashgabat, on November 17-18. Energy ministers of these countries will discuss the progress on a services agreement to be signed between Turkmenistan and French energy giant Total and Malaysian firm Petronas.

Under the deal, the two companies will extract gas in onshore fields in Turkmenistan and in response they will get the pipeline construction contract worth billions of dollars.

The US companies were seeking shareholding in the gas fields in response to their commitment to providing funds for laying the pipeline. However, Turkmenistan turned down the request, throwing them out of competition to become a consortium leader.

Turkmenistan does not give oil and gas concessions to foreign firms in onshore fields. It desired to award offshore gas extraction contracts to Chevron and ExxonMobil, but for that it was required to change rules.

According to officials, seeing an empty field, Total and Petronas entered the fray and expressed interest in gas exploration without demanding any stake.

“Turkmenistan is negotiating a services agreement with the French and Malaysian companies, which could work as consortium leaders,” an official said. “In the upcoming meeting, Ashgabat will brief representatives of project stakeholders on progress on the services agreement.”

The Afghan government says it does not require the entire committed volume of gas and only needs part of it. The remaining quantity will be shared by Pakistan and India.

For the pipeline, which is expected to cost over $10 billion, a survey of the expected route will be undertaken. Its engineering design will also be prepared.

Pakistan will get 1.365 billion cubic feet of gas per day (bcfd), India will receive the same 1.365 bcfd and Afghanistan will get 0.5 bcfd. Turkmenistan will export gas through a 1,800km pipeline that will reach India after snaking its way through Afghanistan and Pakistan.

Pakistan and India have already signed gas sales and purchase agreements and efforts are under way to attract potential investors for financing the project.

The four countries linked with the project are setting up a consortium and selecting a technically capable and financially sound company as the consortium leader, which will design, finance, construct, own and operate the gas pipeline.

Published in The Express Tribune, November 11th, 2014.

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cautious | 7 years ago | Reply

If American business doesn't build the pipeline then American govt won't help fund the protection of the pipeline ... without protection TAPI ain't going to happen.

Dr. Riaz Alawi | 7 years ago | Reply

TAPI is wishful project and it's rhetoric does not match any of the ground realities. The very fact that Turkmen leadership is risk averse, does not comprehend trans border trades, let alone distant markets and insists upon selling gas at the border demonstrate their inaptitude. In addition to Turkmen mind set and the security, there are major commercial issues with TAPI. No E&P company will invest billions without their own equity gas in the pipeline and this is where the Turkmen mind set refuses to shift. They fail to understand that CNPC of China developing the large onshore "Galkynysh" gas field commands a strategic partnership and price for energy security of China. Both TOTAL SA. and PETRONAS do not enjoy any strategic incentive and their potential participation, if any remains purely commercial. It is entirely up to Turkmen leadership to built up consortium lead of course with consensus of partner countries but that takes sharing the risks and resources something, they will not do hence, the Rhetoric only.

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