(EnergyAsia, August 8 2015, Saturday) — Turkmengaz, Turkmenistan’s state-owned gas company, has been chosen to lead an international consortium to build, finance, own and operate a proposed 1,600-km to deliver natural gas from Central Asia to South Asia. The Asian Development Bank (ADB) will continue to advise as well as help finance the US$7.6-billion pipeline to link up Turkmenistan, Afghanistan, Pakistan and India (TAPI) with possible extensions to other countries in Asia.
According to the bank, the TAPI steering committee endorsed Turkmengaz to lead the TAPI Pipeline Company Limited at the 22nd meeting of the four countries’ petroleum ministers and ADB officials in Ashgabat in Turkmenistan on August 6. Established last November, the company is equally owned by the state-owned gas firms of the four countries: Turkmengaz, Afghan Gas Enterprise, Pakistan’s Inter State Gas Systems (Private) Limited, and GAIL (India) Limited.
Scheduled to start up in 2020, the US-backed project is designed to export up to 33 billion cubic metres of natural gas a year from Turkmenistan to Afghanistan, Pakistan and India over three decades.
Turkmenistan has the world’s fourth largest proven gas reserves and the pipeline will allow it to diversify its gas export markets.
“The endorsement of Turkmengaz as consortium leader is a critical milestone in achieving the successful development of the TAPI pipeline project. When operational, the pipeline will deliver enhanced energy security, business prospects and overall economic stability in the region,” said Baymyrat Hojamuhammedov, Turkmenistan’s Deputy Prime Minister.
Turkmengaz has over 50 years of experience in developing, producing and transporting gas as well as constructing gas pipelines. It expects to invite international companies to join the consortium at a later stage.
Manila, Philippines-based ADB, which has acted as the project’s secretariat since 2003, took on the additional role of transaction adviser in 2013 to help the participating countries establish the TAPI Pipeline Company Limited.
The bank said it has also teamed up with the European Bank for Reconstruction and Development (EBRD) and the Black Sea Trade and Development Bank (BSTDB) to provide a US$1 billion financing package for the Shah Deniz stage II offshore natural gas field project in Azerbaijan. The project will supply gas from the Caspian Sea to Europe along the Southern Gas Corridor.
“The gas will be transported through a chain of pipelines—including the existing South Caucasus Pipeline which will be extended under the project—as well as through the planned Trans-Anatolian and Trans-Adriatic pipelines,” said the bank. The network of pipelines will deliver the gas from Azerbaijan through Georgia and Turkey to Greece and Bulgaria, and on to Italy and other countries in Europe.
“This will be the largest gas field development project undertaken in Azerbaijan, generating more economic opportunities and helping to boost closer regional ties with Georgia and Europe,” said Michael Barrow, ADB’s deputy director general overseeing private sector operations.
“This project is one of the EU’s highest priorities for the energy sector. It is key for energy security because it diversifies routes and sources of gas supply,” said EBRD managing director for Energy and Natural Resources, Riccardo Puliti.
“It helps cut carbon emissions by providing a bridge fuel for renewables and replacing coal. The project will also be a very big step towards the market-based, hub pricing for gas which will bring Europe closer to a common gas market.”
Igor Leshukov, BSTDB’s vice president for banking, said:
“Supporting regional cooperation and energy efficiency in the Black Sea region are strategic priorities for BSTDB. We are happy to contribute to this project demonstrating strengthened synergies among development partners to foster sustainable growth in our member countries.”
The financing will be extended to Lukoil Overseas Shah Deniz Ltd, a subsidiary of Russia’s Lukoil, which has a 10% interest in the Shah Deniz II gas field.
EBRD and ADB will each lend US$250 million to the project on their own accounts (A-loans), and BSTDB will provide a US$60 million parallel A-loan alongside EBRD and ADB. The remainder of the financing will be provided by a group of commercial lenders including Bank of China, ING Bank N.V, Société Générale and Unicredit Bank Austria AG, under the EBRD/ADB B-loan umbrella.
Another commercial bank will join the syndicate at a later stage to complete the financing. The full development cost of Shah Deniz II is estimated at US$47 billion.
BP is leading a consortium comprising TPAO, Petronas, SOCAR, Lukoil, NICO and SGC to build and operate the project facilities. Shah Deniz II is expected to start production in 2018, generating jobs for over 16,000 people through to 2022.