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ADB to finalise framework for $4b TAPI gas pipeline project

A Correspondent
Filed on August 8, 2007

ISLAMABAD — The Asian Development Bank (ADB) has convened here a 2-day meeting on 22 of this month to finalise a framework for $4 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project.

Informed sources said that the delegations of the four nations would attend the steering committee meeting on TAPI, which is represented by secretary level officials from all the parties. Security situation in Afghanistan would be one of the key issues for discussion during the meeting, which is central for turning the ambitious multi-nation project into reality.

The delegations, said these sources, would specify respective gas quantities for allocation by the producer and requirements in recipient countries through the pipeline that is to stretch more than 1,600KM from Turkmenistan's south-eastern Daulatabad field to Indian city of Bikaner, via Afghanistan and Pakistan. The gas quantities would then be reflected in the draft gas sales and purchase agreements (GSPA) prepared by Pakistan. The framework agreement would trigger a host of activities and agreements between and among the four nations and the ADB. The framework is to deal with contractual obligations of the parties in construction of the pipeline, security, gas tariff and uninterrupted gas flows over the 30-years life of the project.

The ADB had furnished final draft of the inter-governmental agreement to the four nations in April this year along with some modifications that were required to allow inclusion of India in the pipeline project. The original inter-governmental agreement was prepared without making India a part of the project and hence an amended draft was required following "an in principle" decision of the Indian cabinet to join the project.

The ADB, which is described as honest broker by playing a leading role in the project, had concluded off late through a feasibility study that Indian inclusion would be of great benefit not only for the project but all the stakeholders including India. The ADB has already incorporated Indian suggestions in the agreement.

A source in the petroleum ministry, however, said before finalisation of the four-nation agreement, the stakeholders have to hammer out seven issues that have been hampering progress on gas pipeline from central Asia to Pakistan for almost two years now.

The capital cost of the 1,435-km pipeline of 56-inch diametres (from Turkmenistan to Multan) had recently been updated to about $4 billion from $3.3 billion in 2004. The pipeline that is to originate from Turkmenistan s Daultabad gas field will run 145-km in the host country, 735-km in Afghanistan and 555-km in Pakistan to Multan under the preferred southern route i.e. via Herat and Kandahar.

The ADB was also working on northern route on Indian request that should pass through Mazar-e-Sharif, Kabul and Peshawar to Lahore for onward extension to Indian city of Bikaner. ADB had originally funded the feasibility study for the project in 2004 and was now updating it.

The sources said a meeting of the steering committee comprising Turkmenistan, Afghanistan and Pakistan will achieve two major milestones. India is also expected to attend the meeting as observer for formal approval by the three parties to make it a member. Turkmenistan would make a formal offer on gas pricing for the project.

The United States is supportive of the project and is ready to assist in security issues.

Pakistan believes that bottlenecks hampering progress on the project involved non-confirmation of uncommitted gas volume by Turkmenistan regarding Daulatabad gas field, uncertainties or lack of clarity with regard to price of the gas to be demanded by Turkmenistan and security situation in Afghanistan.

Also there are significant difficulties in the expected implementation of security and risk mitigation measures proposed by the Asian Development Bank s consultant and usual delays of the Turkmen government in complying with the decisions taken by the tripartite steering committee.

There are chances of raising a special security force in Afghanistan to protect the pipeline; still the law and order situation there is a cause of real concern that would remain in place for many years to come.

The ministry of petroleum has also identified as bottlenecks the third party guarantees for the required gas allocation by Turkmenistan government and internal political situation in Turkmenistan. Pakistan had planned under its 30-year Energy Security Plan to commence the project in 2007 and complete it in 2011 — both targets are now unachievable in the given conditions. However, the project is now been envisaged to be completed by 2018.

Turkmenistan, Afghanistan and Pakistan are also in the initial stages of discussions on development of complete energy corridor under multi- billion dollar TAP project including two parallel gas and crude oil pipelines, railway track, road and optic fibre system.

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