TAPI gas project not sustainable for Pakistan if India opts out

Workers stand near a gas pipe during the launching ceremony of construction work of the TAPI project on the Afghan section of a natural gas pipeline that will link Turkmenistan through Afghanistan to Pakistan and India, near the town of Serhetabat, Turkmenistan February 23, 2018. — Reuters

Pakistan to give ‘transit fee of $500 million per annum’ sans India.
TAPI aims to bring natural gas from Turkmenistan’s gas field.
Without India, gas pipeline not sustainable for Pakistan, say officials.

ISLAMABAD: Pakistan’s top functionaries are pondering on quitting $10 billion 1,849km Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas line project if India does not want to become a part of it, officials said.

The trans-nation project without India would become TAP, which will not be sustainable for Pakistan anymore. Officials said, “One of the top men of Petroleum Division sensitised the [General Headquarters] GHQ some days back, informing them India’s response is extremely lukewarm towards the project. Without India, Pakistan would have to give a transit fee of $500 million per annum apart from gas price of $7.5 per mmbtu.”

They said the gas price from Turkmenistan would exceed the costly RLNG price, adding this is how the country would have to pay $5 billion per annum, which is not sustainable. Background discussions with top energy and SIFC officials also suggest if India stays a part of the project, Pakistan would get transit fee from Delhi in the range of $700-800 million per annum.

This is how it would save $200-300 million per year just in the head of transit fee and price of gas from Turkmenistan would be economical for Pakistan. In this scenario, India would have to give two transit fees separately to Afghanistan and Pakistan. The TAPI gas pipeline project aims to bring natural gas from Galkynysh gas field (formerly called South Yoloten) in Turkmenistan to Afghanistan, Pakistan and India.

The pipeline with diameter of 56 inch will transport up to 33 billion cubic meters (average 3.2bcfd) of natural gas per year over a 30-year period. Pakistan and India would have offtake of 1.35bcfd each and 500mmcfd to be used in Afghanistan.

From Afghanistan, it has to enter from Herat and Kandahar to Chaman. It will pass through Zhob, DG Khan and Multan and will reach Fazilika (Pak-India border) to enter India. Turkmenistan will be having 85% share in the project, while Afghanistan, Pakistan and India would each have 5% share of $200 million.

India had not completely walked away from the project but was cautious and non-committal due to security challenges and evolving political situation in Afghanistan and Pakistan. India, earlier, quit the IPI gas pipeline, and in return it got a lucrative package from US.

As far as Pakistan is concerned, gas consumption has dwindled by 150mmcfd per month. In the current calendar year, gas pressure in the shape of line pack pressure increased over an alarming figure of 5bcf (billion cubic feet) for about seven times, putting national gas transmission system in jeopardy because of non-utility of gas in the country.

Pakistan is currently importing 10 LNG cargoes (9 from Qatar and 1 from ENI), but it is failing to consume the whole imported gas. Because of this issue, Pakistan has formally asked Qatar to reschedule five LNG cargoes that are to be imported in 2025. The country would get those in 2026 under the flexible clause.

The authorities are also trying to firm up the plan to shelve import of 13 more LNG cargoes that are to arrive in Pakistan in 2025, or Qatar may halt export of 13 cargos to Pakistan.

“The RLNG consumption has now started tumbling by 150 million cubic feet in a month, which means 18 LNG cargoes in 2025 would turn additional ones mainly because of lower GDP growth in the country and reduced industrial activities,” the officials said.

Under this scenario, without India, TAP (Turkmenistan-Afghanistan-Pakistan) gas line is not sustainable for Pakistan and cannot consume the gas through this project at more than RLNG cost.

More importantly, despite the cutoff date in October 2023, Turkmenistan has not yet fully achieved financial closure for TAPI gas pipeline. The project, which aims to transport natural gas from Turkmenistan to India through Afghanistan and Pakistan, has faced significant challenges over the years, including security concerns, funding issues and geopolitical tensions.

For India, TAPI pipeline is a large-scale infrastructure project that requires significant investment. India’s energy security needs are critical. But there are concerns over whether the cost and potential return on investment will justify India’s involvement, especially given the long-term stability issues in Afghanistan and Pakistan.

There are reports India has been exploring other options to diversify its energy mix, including LNG imports, renewable energy projects and other regional energy corridors. As a result, India’s energy strategy has shifted in favour of more stable and secure alternatives, reducing urgency of pursuing TAPI.

Turkmenistan has been seeking from Pakistan legislative cover of Foreign Investment Promotion and Protection Act (FIPPA) 2022 for its investment to be made in Pakistan’s territory under TAPI gas line. Pakistan has refused to give FIPPA status as Afghanistan and India didn’t deliver to Turkmenistan such kind of cover.

However, Pakistan has already assured protection of Turkmen investment with a sovereign guarantee under the Host Government Agreement (HGA).

Originally published in The News