Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline Gets Official Four-Way Go-Ahead

After over fifteen years on the drawing-boards, the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project was approved by the four countries’ leaders, meeting in Ashgabat in December. While the intergovernmental agreement naturally depends upon follow-on negotiations to be realized, it is anticipated that sales and purchase agreements will be signed at another four-way meeting that could take place as early as April 2011. The success of such a project would continue diversification of Turkmenistan’s gas export directions, provide needed resources to gas-hungry Pakistan and India, and not least give Afghanistan a keystone development project upon which to build economic reconstruction.

BACKGROUND: On December 11 in Ashgabat, Turkmenistan signed an intergovernmental agreement with Afghanistan, Pakistan, and India for the so-called TAPI gas pipeline, a 1,050-mile project that would link the four countries. The countries’ energy ministers signed a complementary framework document. However, they did not authoritatively decide terms for future sales or any issues related to the pipeline’s construction or operation.

After a pipeline from Turkmenistan to Pakistan through Afghanistan was first proposed in the mid-1990s, a Unocal-led consortium signed a construction agreement in early 1998 with the new Taliban government in Kabul. It was never built after Unocal withdrew from the consortium in late 1998 because of international publicity of the human rights abuses, and in particular the treatment of women, under the Taliban regime. After the end of the Taliban regime, the idea was revived. At the end of 2002, the three countries signed a new agreement. The Asian Development Bank (ADB) conducted a feasibility study, executed by the British firm Penspen, which rendered a favorable verdict in 2005. In 2006, the Indian federal cabinet approved India’s joining the project, although New Delhi had not yet been invited; India was formally incorporated into the project in 2008.

The project received increased impetus from Turkmenistan following President Saparmurat Niyazov’s death and his succession by Gurbanguly Berdimuhamedov at the end of 2006. Another key factor was Russia’s treatment of Turkmenistan in the wake of the April 2009 pipeline explosion in the latter country, which Turkmenistan accused Russia of instigating, and which led to the suspension of gas exports to Russia for the rest of that calendar year, with reduced quantities flowing in 2010 as well. The present design of the project provides for export of 33 billion cubic meters per year (bcm/y) from Turkmenistan, of which India and Pakistan would each receive 14 bcm/y while Afghanistan gets 5 bcm/y. Indian demand for natural gas would justify laying a parallel pipeline later to double the quantity, and this is not out of the question if the initial implementation is successful. The present schedule foresees the end of construction in 2014 with the pipeline entering into service in 2015.

It is thought that transit revenues accruing to Afghanistan would be in the order of US$ 300 million per year, equivalent to one-third of the annual budget for development projects, in addition to providing for domestic job creation. This would also enhance possibilities for the development of domestic gas resources in Afghanistan for local use. Earlier estimated to cost only US$ 3.3 billion when it was a trilateral Turkmenistan-Afghanistan-Pakistan, the current cost figure including India is US$ 7.6 billion. It was at first thought that the gas would come from Turkmenistan’s Daulatebad field, but Ashgabat has now clarified that it will come from the newly discovered South Yolotan-Osman field. A 1,045-mile route going south from Turkmenistan and then east through Herat and Kandahar was chosen over a northern route through Kabul because of terrain considerations. Mountains in the north rendered that route too difficult, and the southern route has roads that facilitate the transport of construction materials.

IMPLICATIONS: The four-way decision to implement the TAPI project is the coup de grace against the long-discussed Iran-Pakistan-India gas pipeline project, which never progressed beyond the stage of Iran-Pakistan and Iran-India bilateral consultations. In the end, Pakistan signed an agreement with Iran in May 2009 for a reduced-volume bilateral pipeline after India withdrew from the project in 2008. In 2010, Iran stated that it had completed the internal segment on its own territory (or at least from the Assalouyeh Energy Zone to Iranshahr, 120 miles west of the Pakistani border). The floods and political unrest in Pakistan (the pipeline enters in Baluchistan) have likely delayed its execution of its part of the project. The variant whereby the gas would have gone to the Pakistani port of Gwadar (on a small peninsula in the country’s southwest at the entrance to the Persian Gulf) for liquefaction and sea transport to China is no longer in play. In March 2010 China ceased providing its development assistance to Gwadar, a few months after pulling the plug on the Khalifa refinery project, also in Pakistani Baluchistan.

The ADB intends to fund one-third of TAPI’s estimated cost. This declaration represents a geo-economic seal of approval that should help to unlock funding from the financial centers and the private sector, much as the European Investment Bank and European Bank for Reconstruction and Development play similar roles for European pipelines from Russia and the South Caucasus. India had early on hinted that it would like its own companies to have a significant role in the pipeline’s construction, and Berdimuhamedov has reportedly approved a leading role for India in the pipeline construction consortium. Chinese and American companies have also been reported to be expressing interest in the construction consortium. At the December 2011 meeting in Ashgabat where the quadripartite agreement was inked among their leaders, the respective energy ministers also signed a complementary framework document. This document foresees, early in 2011, a series of three bilateral meetings between Turkmenistan and each of the other participating states in order to agree supply conditions, including commodity price and transit tariffs. Then another four-way meeting should be held to agree and legitimize contractually all the sales and purchase agreements together.

The fact that Ashgabat has informed its partners that the gas will come from South Yoloton-Osman rather than from Dauletabad strongly suggests that it is preparing an eventual decision to participate in constructing a Trans-Caspian Gas Pipeline (TCGP) to Azerbaijan for gas to enter either the Nabucco pipeline and/or any of a number of other gas transmission projects to Europe as defined by the EU’s Southern Corridor strategy. That is because Dauletabad is the source of gas for the so-called East-West Pipeline (EWP) inside the country that Turkmenistan decided in 2010 to reconstruct on its own rather than contracting with Gazprom or any of the other 70 international companies that had responded to its international tender. The western terminus of the EWP is not far from the country’s Caspian Sea coast, and its projected refurbished volume is 30 bcm/y. That happens to be the minimum volume necessary to make the TCGP commercially viable and preferable to other methods (such as condensation or liquefaction) for transmitting the gas. At the December 2010 five-way Baku summit of Caspian littoral states, Berdimuhamedov declared that any two countries should have the right to build a pipeline under the sea between them without having to ask permission from all the others.

CONCLUSIONS: It is intended that segments of the TAPI pipeline in Afghanistan are buried in order to make them less susceptible to terrorist attacks. Local communities will be given incentives to participate in this defense, and the central government has bruited the deployment of 7,000 soldiers (to be trained by NATO) to safeguard the route. Successful implementation of the project would not only assist in the peaceful economic development of Afghanistan, diversify Turkmenistan’s gas exports, and provide resources to energy-hungry Pakistan and India. It would also alter the geopolitical contours of the region, providing an artery for intensifying cooperation in the meta-region that lies east of the Caspian Sea, south of Russia, and west of China. In particular, it would in the first instance integrate Afghanistan more into South Asia while giving India the opportunity that it has long sought to deepen its own geo-economic projection into Central Asia.

Originally published at Central Asia-Caucasus Institute and reproduced here with permission.