TAPI pipeline unlikely before 2020

Extractability of reserves of 16 trn cubic meters of gas from South Yolotan-Osman field could pose a challenge

India will not receive gas for the next 4-5 years from energy-rich Central Asia through the proposed $10 billion TAPI pipeline, says a report.

"The TAPI pipeline is unlikely to be commissioned by the proposed timeline of FY18, and India will continue to rely on domestic gas and imported LNG," India Ratings said in a note on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) project.

The agency saw four key issues associated with the successful commissioning of the pipeline -- seller's willingness to sell gas at a price feasible for the ultimate buyer, volume off-take assurance by end-consumers, funding of the pipeline and geopolitical risks associated with the construction and operation of the 1,735-km long pipeline.

"The willingness of Turkmenistan state concern to price its gas in a manner which would ensure its cost competitiveness in countries where the gas is finally sold is essential for the project to take off," it said.



Turkmenistan is a net exporter of natural gas and its economy depends on that and hence may keep prices high.

Additionally, the extractability of the proven reserves of 16 trillion cubic meters of gas from the South Yolotan-Osman field from where the gas would be supplied, could pose a challenge. "This could limit the quantum of gas available for transportation from the pipeline," it said.

India Ratings said many user industries may find the gas unviable for their operations if the landed price of gas in India from the pipeline were to be high at $10-12 per million British thermal unit, almost double the domestic gas rate.

Gas-based power plants and fertiliser plants using gas from TAPI would lead to high power tariffs and higher subsidy.



"Transit fee payable to each nation from where the pipeline passes and funding tie-ups for the project could hinder the prospects given the geo-political risks and the lack of off-take agreements," it said.

Financial closure for the project would involve significant support from participating countries including equity participation and guarantees for the project debt.

"This is because the construction and operation of the pipeline, which will pass through difficult and conflict- affected geographies in three countries, carry major credit risks," it said.

TAPI pipeline is likely to transport 90 million standard cubic meters of gas per day, out of which India's share will be 42 per cent (38 mmscmd).

India's gas deficit stood at 148 mmscmd in FY15, which means 26 per cent of the deficit can be bridged if TAPI materialise.

"The pipeline will thus be a boost for energy starved India. However, its commissioning faces multiple challenges which are unlikely to be addressed quickly and will make it a long gestation project," India Ratings said.