TAP gas pipeline project in trouble

The $4 billion Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline project, which India has been invited to join, may be shelved due to a fresh pact between Russian gas giant Gazprom and Ashgabat for increased Europe-bound gas supplies at higher rates.

The 1,680-km TAP gas pipeline project is unlikely to materialise even in the next decade owing to Gazprom's fresh agreement with Turkmenistan for increased Europe-bound gas supplies at enhanced rates, which apparently means that the Central Asian state would have little surplus gas available for export to the South Asian region.

Gazprom, the world's biggest natural gas producer, has agreed to pay about 50 per cent higher price to Turkmenistan from next year.

Pakistan was weighing the new developments in the background of a just postponed ministerial meeting of the three countries and a revised agreement between Gazprom and Turkmenistan, government sources here were quoted as saying by the Dawn daily. The project cost has now been estimated at $5.3 billion.

India had also been invited to join the project last year and had started attending steering committee meetings as an observer.

The gas price could become a stumbling block because Pakistan and India may find it "unaffordable for their economies."

Moreover, a sharp increase in gas prices delivered to the European markets could make the option of exporting to South Asia less attractive to Turkmenistan and thus the export price could become a major issue, the report said yesterday.

Enough reserves are apparently not available in the immediate future for a South Asian gas pipeline, the sources said.

According to the World Bank, further progress on the TAP project "will depend on the robustness of the gas reserves data, certification of the reserves, extent of possible private interest, ability and willingness of Turkmenistan to fulfil its commitments to Gazprom and still supply Pakistan."

Challenges to the project also include mitigation of the security risk in Afghanistan, improvement in India-Pakistan relations, and programmes to minimise or phase out fuel subsidies in both the countries and, finally, the ability of the pipeline options to withstand competition from liquefied natural gas (LNG) in the long-run, according to the bank.

Pakistan has planned to complete the project by 2012 under a energy security plan, but the deadline is becoming beyond imagination, an official said.