1. Turkmenistan’s reluctance to share output puts TAPI pipeline in limbo

Turkmenistan’s reluctance to share output puts TAPI pipeline in limbo

The fate of the TAPI gas pipeline hangs in the balance even as construction is expected to begin next year.

By: and | New Delhi | Published: December 1, 2014 3:51 AM

The fate of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline hangs in the balance even as construction is expected to begin next year.

That’s because Turkmenistan has argued that its current laws do not permit grant of production-sharing rights for onshore blocks to foreign companies. This has halted negotiations and restricted the number of foreign companies coming forward to build the pipeline.

Sunil Jain, India’s ambassador to Turkmenistan, recently conveyed to petroleum minister Dharmendra Pradhan that Ashgabat (capital of Turkmenistan) has ruled out signing a production-sharing contract (PSC) with any foreign company for extraction of gas from its fields. “The only possibility they are willing to consider is a consortium of national oil companies of all four participating countries, with Turkmengaz, the national oil company of Turkmenistan, as the consortium leader,” a source told FE.

Pradhan had recently visited Turkmenistan for the TAPI steering committee meeting. The pipeline is envisaged to wheel up to 33 billion cubic metres of natural gas a year.

Unfortunately, GAIL is of the view that the complex geopolitical and security issues involved in the TAPI pipeline project make the task of building and operating the pipeline for over 30 years extremely challenging. Since none of the four TAPI entities has such credentials, building the project through a consortium — formed either with equal shareholding or under the leadership of Turkmengas — does not seem feasible, the official added.

In a new development, the US has reportedly stepped into the picture, claiming that a US company should build the pipeline, but only if the Turkmenistan government opens up the upstream sector to such a company. The US government has sounded out Pakistan, Afghanistan and India about pushing in an American company.

Ahead of US President Barack Obama’s visit to India next year, Washington is trying to push the three countries to persuade Turkmenistan to give in. The US proposition is that only a Washington-supported company will have the funding strength and risk appetite to build the pipeline.
Asian Development Bank, the transaction adviser to the TAPI project, is pushing French multinational Total to be appointed as consortium leader, but now Total has also backed out.

And one of the options being explored, if all others fail, is to bring in a Chinese company as the consortium leader to build the pipeline. If India considers a Chinese company as the leader, clearance will be required from National Security Agency and the ministry of external affairs will have to be consulted. A decision will have to be taken on what India’s stand should be on the subject.

As of now, no multinational company has shown interest in building the pipeline. The main reason for their exit is the reluctance of Turkmenistan to give them a stake in its upstream Galkyanysh gas field, from where gas is to be sourced for the pipeline.

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