Turkmenistan pushes TAPI forward but doubts remain
The long-mooted Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline appears to be on the verge of a major breakthrough, but key hurdles look likely to hold up construction of the promising yet politically challenging project.
Turkmenistan’s President GurbangulyBerdymukhammedov has invited his Afghan counterpart to the country on 13 December for the groundbreaking ceremony for the local segment of the 1,600 km project.
But it remains unclear as to whether TAPI will overcome political instability in the region beyond Turkmenistan, allowing the country’s 70 billion cubic metres per year of gas production to reach neighbouring consumers.
According to local media, Berdymukhammedov’s decree to begin construction met with approval when agreed last week. The Turkmen spur of the pipeline is scheduled to be built by December 2018.
The document ordered state companies Turkmengaz and Turkmennebitgazgurlushyk to design and build the country’s section of TAPI, which will have a capacity of 33 bcm/y, as well as auxiliary infrastructure. Turkmenistan was selected as the lead developer by the TAPI consortium earlier this year.
“Turkmenistan occupies a key position in the consortium, as it is the only supply country,” Luca Anceschi, a lecturer in Central Asian Studies at the University of Glasgow and an expert on the TAPI project, told Interfax.
“Without Turkmen gas, there’s no TAPI. We now know that Turkmenistan’s gas reserves are substantive, and as a consequence there is the capability to satisfy current [Chinese] and future [TAPI] demand,” he said.
“The involvement of Turkmengaz is of crucial importance here, as its role of consortium leader demonstrates that […] Ashgabat is serious about TAPI but, at the same time, it is an indicator of the failure to involve external companies,” Anceschi added.
Increasing demand
TAPI is designed to meet growing energy demand in Afghanistan, Pakistan and India – which have a combined population of over 1.5 billion. The pipeline will bring benefits along its route, including enhanced electrical generation capacity and employment opportunities. Yet the security situation in Afghanistan is likely to be decisive in whether the scheme can attract adequate investment.
“I don’t think TAPI will actually be built. Active development will be pursued until construction reaches the Turkmen-Afghan border,” Anceschi said. “Then, security concerns related to the protection of the infrastructure running through Afghanistan will prevent [its] continuation.
“At least at this stage, Afghanistan remains too unstable. As the key transit state, this instability will affect TAPI,” Anceschi added.
Chin Choon Fong, senior adviser for the Central and West Asia Department at the Asian Development Bank (ADB) – TAPI’s financial adviser – underlined the initiative’s importance but noted the challenges involved.
“Turkmenistan has one of the world’s largest proven gas reserves, and the pipeline will allow it to diversify its gas export markets to the southeast, into southern Afghanistan, Pakistan, and northern India. Revenues from these gas sales will bring substantial benefits to the Turkmen economy,” Chin said.
However, China accepted the pipeline will “cut across highly sensitive security areas” and that it is a “large and complex” project that will need to find finance from a range of lenders. It is likely bankers will ask for guarantees the pipeline will not be targeted by insurgents, analysts argue.
“TAPI is at an early stage of project development, with discussions under way on many financial, technical and legal issues. The consortium leader will have to resolve [these issues before] construction can begin,” Chin said, before the news from Ashgabat.
If built, the project would create an alternative market for Turkmen gas, which is currently only able to reach China under long-term contract. Plans to export to European markets are on hold and unlikely to materialise before the end of the decade.
An agreement some years ago indicated a price for imports to be paid by each country, but the lower cost of Asian LNG cargoes means India and Pakistan are likely to argue for a change. The ADB confirmed in late October that the partners had reached a deal to build the pipeline.
TAPI was first proposed in 1995, with numerous political summits since then aimed at building a technical and business case for the project.
A number of disputes have been solved over recent years, including over security and transit fees, for example. The total cost of construction and development is likely to be around $10 billion.
https://interfaxenergy.com/gasdaily/article/18271/turkmenistan-pushes-tapi-forward-but-doubts-remain
