Federal Minister of Petroleum and Natural Resources Shahid Khaqan Abbasi has announced that heads of Pakistan, Afghanistan, India and Turkmenistan will inaugurate a multibillion-dollar transnational gas pipeline project in December this year.
The project, called Tapi pipeline, would be inaugurated on December 25 and would be completed in the next three to four years, said Abbasi while speaking at a press conference along with State Minister of Petroleum Mir Jam Kamal Khan here on Thursday.
He said Afghanistan would be the net beneficiary as it would earn $500 to $600 million in royalty on the shipment of gas through its territory.
The pipeline will run along a highway built in Afghanistan and a special security system will be installed to raise alarm before any incident to ensure the security of infrastructure.
Read: Pakistan, Turkmenistan to give big push to TAPI project
“It is believed that $25 billion will be spent on the upstream and downstream sections of the pipeline,” the minister said.
Upstream development will cost around $15 billion whereas the downstream section will cost $10 billion. Work on both will start simultaneously.
In the last meeting of the Tapi steering committee in Ashgabat, the stakeholders decided that a state-owned company of Turkmenistan would lead a consortium to oversee coordination in the construction, financing, ownership and operation of the 1,800km-long pipeline.
According to the agreement, Pakistan, India and Afghanistan will have 5% obligatory shares in the project, while the Turkmen company, being the lead financier, will have a 51% stake. The remaining 34% will be available to other partner countries.
“We will receive 1.32 billion cubic feet of gas per day, which accounts for 35% of our total production,” Abbasi said, adding the government had collected Rs85 billion in gas infrastructure development cess, which would be spent on the pipeline.
Emphasising the importance of meeting energy needs, the minister said Pakistan would not only complete the Tapi pipeline, but work on the Iran-Pakistan (IP) gas pipeline and more liquefied natural gas (LNG) terminals in Karachi and Gwadar was also under consideration.
China is also constructing a gas pipeline in Pakistan while negotiations are under way with Russia for laying another pipeline at a cost of $2.5 billion.
If the Tapi project was completed on time, the stakeholders would seriously consider building another pipeline from Turkmenistan, the minister said.
Replying to a query, he revealed that a Qatari delegation would arrive on August 24 to talk about LNG supply in a government-to-government arrangement.
Read: Consortium leader to be selected in September
A tender was floated for spot purchase of LNG, but no response was received and the only solution was LNG import through a long-term contract with Qatar, he stressed.
Speaking about prices, the minister said prices for LNG, IP and Tapi gas were at the same level when seen in the context of current crude oil prices.
Abbasi voiced hope that the stalled IP pipeline project could be implemented now as sanctions against Iran were being lifted. In this regard, an LNG pipeline is being laid in Gwadar.
In reply to a question, he said oil price hedging was possible but local oil rates would go up. “People come to us for oil price hedging, but it may lead to a rise in local oil prices.”
The price of diesel and petrol in Pakistan was cheaper by Rs35 per litre compared to prices in India, the minister said.
Abbasi announced that the government had decided to notify 5% to 6% increase in consumer gas prices, which would come into effect from September 1. However, the price increase would not be passed on to domestic consumers.
Published in The Express Tribune, August 21st, 2015.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.