Turkmenistan, Afghanistan, Pakistan, India – the member countries of the TAPI Gas Pipeline project, which will transport gas from Turkmenistan, – will be setting up a consortium TAPI Ltd.
Each consortium member is likely to invest close to $5 million in the project.
GAIL (India) Ltd plans to be part of the proposed consortium.
But, the extent of GAIL’s equity participation in the project will depend on how much risk the company is ready to take in this project.
“There are two issues in such international projects: technical and financial. While GAIL has the technical capability to execute a project of this size, there are some operational concerns – security – which will be the deciding factor on the quantum of risk the company will take,” B.C. Tripathi, Chairman and Managing Director, GAIL, said.
The proposal will require the approval of the Cabinet, which is expected to consider it on Thursday.
The Government-to-Government agreement allows India to become a partner in the consortium.
In the TAPI project, which has US backing, big American companies such as Chevron and ExxonMobil, and Russian company Gazprom, were interested in becoming part of the consortium, but in turn were also seeking access to Turkmenistan’s upstream sector.
The decision with regard to the consortium will be made jointly by member-countries in consultation with the Asian Development Bank (ADB), which will render technical advice regarding the terms and conditions for potential consortium partners. ADB will also be involved in the final selection process.
Purchase pact
GAIL had signed the Gas Supply Purchase Agreement (GSPA) with TurkmenGaz, Turkmenistan's national oil company, for the $7.6-billion project.
The envisaged 1,080-km pipeline (144 km in Turkmenistan, 735 km in Afghanistan and 800 km in Pakistan) will have a capacity to transport 90 mmscmd of gas – 38 mmscmd each for India and Pakistan and the remaining 14 mmscmd for Afghanistan.
According to reports, Kabul has withdrawn from purchasing its share of gas under the project, and this 14 mmscmd is now available to India and Pakistan. Afghanistan has said that it does not require the gas at present, but may approach Turkmenistan in future.
Uniform transit fee
The pipeline is expected to be operational in 2018 and supply gas over a 30-year period. Member-countries of the TAPI project have agreed to a uniform transit fee of 49.5 cents. The transit fee paid is also for the security of the network from where the pipeline is passing.
Transit fee is a crucial issue in such projects as invariably the country at the tail-end of the project ends up paying the most. The transportation charges will be finalised when the project gets implemented by the consortium nominated and all costs are known.
India would like the delivered price (landed cost) of Turkmenistan gas to be in the same range for all buyer countries – Afghanistan, Pakistan and India.
India also wanted the Turkmenistan gas price to be more attractive than the current long-term contract price. Rough estimates show that the Turkmenistan gas may cost around $10-13/mBtu (excluding the transit fee).
The source of the gas is the South Yoiotan Osman field, recently renamed Galkynysh, which has been certified by an international consultant as holding proven recoverable gas reserves of 16 trillion cubic metres.