Pakistan News And Discussion-14

[Naresh]

[center]<b><span style='font-size:21pt;line-height:100%'>USD 4 Billion Tap gas pipeline project in jeopardy</span></b> <!--emo&:flush--><img src='style_emoticons/<#EMO_DIR#>/Flush.gif' border='0' style='vertical-align:middle' alt='Flush.gif' /><!--endemo-->[/center]

<b>ISLAMABAD, Nov 28 : The $4 billion Turkmenistan-Afghanistan-Pakistan (Tap) gas pipeline project is unlikely to materialise even in the next decade owing to Russian gas giant Gazprom’s fresh agreement with Turkmenistan for increased Europe-bound gas supplies at enhanced rates, it is learnt.</b>

Gazprom would be paying about 50 per cent higher price to Turkmenistan from next year.

Informed government sources told Dawn that Pakistan was weighing the new developments in the background of a just postponed ministerial meeting of the three countries and a revised agreement between Gazprom and Ashgabat.

The revised agreement apparently means that the Central Asian state would have little surplus gas available for export to the South Asian region.

Not only that, the price could become a stumbling block because Pakistan and India may find it “unaffordable for their economies” when compared with the much prosperous European region.

The sources said Pakistan was surprised to know at the eleventh hour that Ashgabat has been holding an international energy conference on the dates that were fixed for a ministerial steering committee meeting in Islamabad on Nov 27-28.

Pakistan has planned to complete the project by 2012 under a energy security plan, but the deadline is becoming beyond imagination, an official said.

The sources said under the revised understanding with Gazprom, Turkmenistan would increase gas deliveries to it to about 50 billion cubic metre (BCM).

Gazprom that delivers about one quarter of Europe’s total gas needs would now pay $130 per 1,000 cubic metres to Ashgabat early next year and then $150 per 1,000 cubic metre by the end of the next year instead of current rates of $100 per 1,000 cubic metre.

Turkmenistan and Gazprom have a 25-year gas supply agreement valid until 2028 but Ashgabat, the sources said, uses export projects like Tap to improve its price with Gazprom.

The world’s 10th largest gas producer, Turkmenistan’s total gas output currently is slightly higher than 60 BCM a year. Last year, its total exports stood at around 45 BCM.

Since the death of former President Saparmurat Niyazov last year, the Turkmen economy is opening up for foreign investment.

His successor Gurbanguly Berdymukhammedov plans to quadruple gas output to about 250 BCM by 2030 and Ashgabat would need more than $25 billion to develop its offshore Caspian reserves.

Therefore, enough reserves are apparently not available in the immediate future for a South Asian gas pipeline, the sources said.

Already, Turkmenistan is expecting a major competition among big players like the US, Europe and China to keep Gazprom under pressure on pricing issue.

<b>Likewise, the US and the European Union are using their influence for a pipeline that could link Turkmenistan’s yet to be developed gas fields with Europe through Turkey in what is called a southern corridor to bypass Russia.</b>

The 1,680km Tap pipeline of 56-inch diametre needs at least 30 BCM of gas per year from Turkmenistan to Pakistan via Afghanistan.

The project cost has now been estimated at $5.3 billion. India had also been invited to join the project last year that started attending steering committee meetings as an observer.

According to the World Bank, however, “further progress will depend on the robustness of the gas reserves data, certification of the reserves, extent of possible private interest, ability and willingness of Turkmenistan to fulfil its commitments to Gazprom and still supply Pakistan”.

The ability and the willingness of Turkmenistan to feed this pipeline while fully honouring its earlier commitments to Gazprom for the European and former Soviet Union markets and the extent of possible private sector interest will also remain a challenge while the sharp increase in gas prices delivered to the European markets could make the option of exporting to South Asia less attractive to Turkmenistan and thus the export price could also become a major issue.

<b>Challenges in the Tap project also include mitigation of the security risk in Afghanistan, improvement in India-Pakistan relations, and programmes to minimise or phase out fuel subsidies in both countries and finally the ability of the pipeline options to withstand competition from liquefied natural gas (LNG) in the long run, according to the bank.</b>

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