(EnergyAsia, April 14 2017, Friday) — Proponents of an 1,800-km pipeline to deliver natural gas from Turkmenistan to Afghanistan, Pakistan and India remain hopeful the project will be built despite running up against a continuous tide of political, financial and security challenges.
First mooted more than 20 years ago, the proposed project has undergone numerous amendments to tap Central Asia’s huge natural gas reserves. The latest blueprint laid out by the Asian Development Bank (ADB) envisages the TAPI pipeline, named after the four countries, to deliver up to 33 billion cubic metres of natural gas per year to support the energy demand and the development of economies in Central and South Asia.
The long delay and revisions have seen the project’s initial estimated cost tripled from around US$3.3 billion to US$10 billion today.
Recent news reports from Pakistan, India and Azerbaijan suggest that technical and survey work has started after over a year of near inactivity.
Turkmenistan claims to be making headway with building the 200-km section of the pipeline inside its territory to tap the giant Galkynysh which holds an 16 trillion cubic feet of natural gas reserves.
Turkmenistan has promised to invest US$25 billion to deliver 3.2 billion cubic feet of gas per day (bcfd) to Afghanistan, Pakistan and India for 25 years, starting December 2019.
In December 2015, Turkmenistan’s President Gurbanguly Berdymukhammedov and his Afghan counterpart Mohammad Ashraf Ghani jointly held a groundbreaking ceremony to start work on the project in the eastern Turkmen province of Mary. Berdymukhammedov then announced that the Turkmen section would be ready by December 2018. That has proved optimistic given the continuing weakness in energy prices, and the region’s unstable geopolitics and security threats.
Already, Turkmenistan’s state firm Turkmengas has missed its December 2016 deadline to achieve financial close on the project, and is now hoping to do that by June 2017, said the Pakistan-based Institute of Strategic Studies. There’s no guarantee it might even achieve this deadline, casting doubts on whether the project can meet its latest start-up target date of 2020.
The US-backed ADB is clearly pushing against the tide in trying to jumpstart the TAPI bandwagon.
Security remains the foremost concern. Afghanistan is a hotbed for terror and local militia activities, with US troops still actively engaged in combat against the Talibans and Al Qaeda sympathisers. Pakistan has long been a safe haven for Islamic militants fighters and other radical groups. The antagonistic relations between Pakistan and India add another dimension of uncertainty and risk that will overwhelm most investors.
China and Russia are hardly enthusiastic as TAPI does not serve their respective national interests. China has already put in place its pipeline network through the Xinjiang region to tap Central Asia’s oil and gas resources since 2009. Russia, which was Turkmenistan’s only gas customer before China broke the stranglehold in 2009, has no wish to see another pipeline further reduce its influence over the region’s oil and gas producers.
Somewhat optimistically, the ADB said last September that as the project’s financial adviser, it would help “mobilise resources from other financial institutions.” It said it would also consider financing shareholder equity as well as provide non-sovereign loans and credit enhancement for the project’s operator, TAPI Pipeline Company Limited (TPCL).
Established in 2016, TPCL, which is owned by the four countries, has an initial budget of over US$200 million to fund engineering and survey studies needed to support decisions leading to the project’s final investment decision (FID). The ADB said construction would take up to three years upon FID approval.
In 1995, Turkmenistan and Pakistan signed the first agreement to build the first version of TAPI, but it was invalidated when the Talibans seized control of Afghanistan a year later. The US supports the project as it will help Turkmenistan open up new markets and reduce its traditional dependence on Russia and China.