Dragon Oil looks to back $10bn gas link
Dubai-owned Dragon Oil is in talks to invest in a $10bn pipeline to deliver natural gas from Turkmenistan to India, a potential boost to the project after several western oil companies failed to secure a role.The Tapi project has been delayed for years amid numerous challenges — including building a pipeline across war-torn Afghanistan — but is gathering pace as Turkmenistan, facing a plunge in revenues because of the oil price fall, seeks new customers for its natural gas.
Construction will begin next month, Turkmen officials told an oil and gas conference in the capital, Ashgabat, last week.
However, a search for a private-sector partner has so far proved fruitless: ExxonMobil, Chevron and Total dropped out amid declining oil prices and Ashgabat’s insistence on retaining rights to its onshore gas reserves, the world’s fourth largest. Turkmengas, the state company, was named as project leader this summer.
Faisal Rabee Al Awadhi, general manager for Dragon Oil in Turkmenistan, said the company had signalled its willingness to invest in Tapi. “This [discussions on Tapi] has been ongoing for a long time. But now it’s very serious, things have been signed between the countries. That’s why we have shown our interest to go in,” he said.
Turkmenistan’s economy, which relies on oil and gas for more than 90 per cent of its export revenues, is under pressure amid falling prices and slowing demand from China, its main customer. MuhammetnurHalylov, oil and gas minister, said Tapi would “significantly expand export capacity and will significantly strengthen economic stability in the region”.
The project is set to start seeking financing next year after the four countries involved initialled a deal last month under which Turkmengas will have an 85 per cent stake in the consortium with Afghanistan, Pakistan and India holding 5 per cent each.
Turkmengas is seeking to sell up to 34 per cent, reducing its stake to 51 per cent, people familiar with the matter said.
Mr Al Awadhi said Dragon Oil’s talks with the Turkmen government were at an early stage and it had not yet determined the size of any potential stake. Other investors could include Japanese and Korean companies, people familiar with the discussions said.
However, many remain sceptical that the pipeline, which has been under discussion since the 1990s, will be built.
Daniel Rosenblum, US deputy assistant secretary of state for central Asia, warned that without a private sector partner the project, which Washington has long championed, may struggle.
Moreover, falling global gas prices mean that liquefied natural gas is increasingly becoming a more competitive option for energy importers such as India and Pakistan.
Another concern is securing the pipeline’s 1,500km route through Afghanistan and Pakistan. But Mohammed FazilSaifi, Kabul’s ambassador to Ashgabat, said that the 25,000 jobs the project will create in Afghanistan would guarantee its security.
“We know that if the pipeline goes ahead there will not be a problem. We know our people,” he said.
Dragon Oil produces about 100,000 barrels a day of oil from an offshore field in Turkmenistan. However, Mr Al Awadhi said that if it had access to an export route, it could “easily” produce 300m cubic ft of gas per day (about 3.3bn cubic metres a year, or a tenth of the total planned capacity of the Tapi pipeline).
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