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Tuesday, 08 September 2015

Turkmen state company to lead consortium for TAPI pipeline project

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By Tavus Rejepova (09/02/2015 issue of the CACI Analyst)

On August 6, the participants of the 22nd Steering Committee meeting of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project unanimously agreed in Ashgabat that Turkmenistan’s State Company TurkmenGas will lead the TAPI Ltd. consortium, a pipeline company that will design, build, own and operate the TAPI Pipeline. After the much awaited selection of a possible consortium leader among interested international oil and gas companies, this move paves the way to begin work on the project.

The Steering Committee meeting in Ashgabat was attended by the oil and gas ministers of all four TAPI participating countries and representatives of the Asian Development Bank (ADB), acting as a Transaction Advisor for the project. Official Turkmen sources stated that TurkmenGas has more than fifty years of experience in development, transportation of natural gas and construction of domestic and international pipelines. During the committee meeting, it was reported that Bangladesh has also expressed interest in joining the TAPI project.

The participating parties in TAPI will now prepare a Shareholders’ Agreement that will also lay out the responsibilities of the Board of Directors. Turkmenistan’s government has recently announced that the construction of the TAPI pipeline will commence in December this year and invited the participants to take part in the groundbreaking ceremony.

The pipeline, 1,820 kilometers (1,130 miles) long, is designed to carry 33 billion cubic meters of Turkmen gas per year and is expected to stretch from its main source, the Galkynysh gas field in Turkmenistan, via Herat and Kandahar in Afghanistan and Chaman, Quetta and Multan in Pakistan, to Fazilka in India. Some sources have reported that most of the pipeline’s Afghanistan portion will run along the Kandahar–Herat Highway and that a special security system will be installed to offset the security concerns.   

On August 21, Pakistan’s Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi was reported as saying at a press conference that the works on the TAPI gas pipeline will start on December 25, 2015 and that the entire project will be completed in three to four years. The minister estimated that the upstream development of the TAPI project would cost about US$ 15 billion while the downstream would cost US$ 10 billion, and that the construction of both ends will start simultaneously. Pakistani media reported that Pakistan, India and Afghanistan agreed to 5 percent obligatory shares in the project, while TurkmenGas will have a 51 percent stake. The remaining 34 percent will be available to other partner countries and companies. 

It is still not clear who will carry the major burden of funding the project. Abc.az has reported that the Beijing-based Asian Infrastructure Investment Bank (AIIB) will become the main investor in TAPI’s construction at the initiative of the TAPI parties. AIIB has not yet released any information confirming this statement. Several western international oil and gas companies have dropped out of the race for a project leader positon after being denied a stake in the country’s onshore resources.

TAPI has been termed a peace pipeline as it is expected to create new jobs for Afghanistan’s population along the pipeline route and also bring Afghanistan US$ 600 million per year as a transit fee. As a consortium leader, TurkmenGas will now head the coordination work on TAPI’s construction, financing, ownership and operation. Turkmen official media reported that other international companies may join the consortium in the further stages of the project. During his visit to Istanbul on August 6, President Gurbanguly Berdimuhamedov invited Turkish companies to participate in the implementation of TAPI. Turkey’s Petroleum Corporation (TAPO) has expressed an interest in Turkmenistan’s proposal on the TAPI project. “At present, Turkmenistan’s proposal is under consideration,” TAPO was reported as saying in an interview to the Trend news website.

TAPI’s implementation has made headway especially after Indian Prime Minister Narendra Modi’s July 11 visit and meeting with President Berdimuhamedov in Ashgabat. In addition, Turkmenistan is seeking to speed up the construction of the project in light of Russian Gazprom’s reduced purchases of Turkmen gas from 10 bcm to 4 bcm in 2015 and falling natural gas prices as an effect of the slump in global oil prices. 

Image attribution: Wikmedia Commons

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