TAPI Pipeline: Expected by 2017?

12 Mar, 2014    ·   4335

Roomana Hukil analyses why the commencement of the TAPI pipeline project by 2017-18 is likely after all

Roomana Hukil
Roomana Hukil
Research Officer

Recent talks by the Indian Minister of Petroleum and Natural Gas, Veerappa Moily, on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project and China taking over the chief controllership of the pipeline project from the US has resulted in the resurgence of the discourse on the longstanding uncertainty regarding the realisation of the pipeline. The Minister, at the recent Petrotech 2014, stated that the project has been “fast-tracked” and “readied” by the four countries, and is expected to reach India by August 2017. There are two questions that garner attention from this: what are the contemporary developments vis-a-vis the project in Asia? How likely is the prospect of the pipeline of becoming a reality by 2017?

Fractures in the pipeline
Although there is a shared sense of uncertainty extending from Central Asia to South Asia over the prospects of the project, there is also a sense of optimism that the project will help bring greater stability to the region than has been sought. Given that the end of 2014 will coincide with the withdrawal of the US troops from Afghanistan, the security and stability of the nation is the most pressing issue in the sub-continent.

The TAPI gas pipeline project is expected to help stabilise Afghanistan and supplement the reconstruction process by creating more job opportunities whilst guaranteeing income from the transit charges. However, this will depend on the resolution of the grave insurgency problem in the country’s southern provinces – where a substantial portion of the pipeline bridges through. The existing political and security-based instability in the Afghanistan-Pakistan bilateral is another issue the project will have to endure.

Secondly there’s a question of the tenuous India-Pakistan relationship affecting the progress of the project. Assuredly, the project will test both India and Pakistan’s determination and capability to resolve outstanding issues and normalising trade procedures.

Signed in 2012, TAPI was the first trans-national pipeline India struck a gas sale purchase agreement (GSPA) over. The project is of great significance to both countries as has been the Indus Waters Treaty (IWT). The IWT is a significant marker in the New Delhi-Islamabad strategic relations. Even during times when the countries were at war with each other, the IWT was not breached by either side.  Therefore, the TAPI pipeline project will be another major test of cooperation between India and Pakistan.

Another important perspective to this issue is that Turkmenistan's primary objective is to promote the TAPI gas pipeline project to reduce their reliance on supplies and aid from Russia, and to boost its annual gas exports to 180 billion cubic metres by 2030.

Tapping the TAPI by 2017-18 or Not?
Although there have been talks that the TAPI project will see the light of day in 2017, how plausible is the prospect of the project meeting its deadlines? There have been disagreements between the stakeholders vis-à-vis the nature of the project execution with regard to a timeline monitoring system – pitched by Afghanistan but batted out by Pakistan. Recently, there have been fresh technicality-based disagreements between Afghanistan and Pakistan over branches of the pipeline not being connected to its main route. While Afghanistan wants the Pakistani territory section to be laid towards Peshawar (where a majority of Afghan refugees reside), Pakistan prefers that the branch be set in Lahore – given that the demand for natural gas is comparatively higher there. Thus, the feasibility study has nearly concluded, but the approval hasn’t been passed due to the disagreement.

In Turkmenistan, there have been concerns as to whether the supply of gas can be sustained in the longer run at all. More importantly, there is still no clarity on who the underwriter of the project will be. Earlier, the main sponsor of the project was the U.S. Agency for International Development. These unresolved issues impede the project from materialising in the near future.  Owing to Turkmenistan’s attitude of not declaring the statistics of the hydrocarbon reserves owned by the country, there is no international pipeline company willing to put the project into action. Turkmenistan has refused to grant foreign investors a stake in its oil and gas fields. While several financial corporations have expressed interest in funding the project, there is no pipeline company ready to undertake the construction. Thus, the four countries have sought for a globally reputed firm to execute the project.

India has taken concerted efforts in speeding the implementation process of the project. Today, the Indian economic outlook is significantly better than what it used to be in 2012-13. Additionally, other stakeholders too are pressing for an international consortium to operate the $7.6-billion gas pipeline. More so, the Asian Development Bank as the transaction advisor will provide a greater thrust for a consortium cluster to accelerate the process. Thus, the prospects of a consortium materialising do not seem far flung this year.

Furthermore, Canada has exhibited interest in providing fracking technology to India and with the mutual declaration signed between Turkmenistan and China on building a strategic partnership to support the project several factors deem a favourable environment for the TAPI pipeline project to commence by 2017-18.