TAPI Partners to Hold Bid for "Global Energy Giant"

Canadian Centre for Policy Alternatives

Proposed TAPI Pipeline

Energy ministers from the four countries involved in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline have now decided to invite a "global energy giant" to bid on implementation of the project, the Hindu Times and other India media reported this week.

Turkmenistan has been aggressively pursuing its neighbors in recent months to close the deal on the pipeline to run from the Dovletabad gas fields in the southeast of Turkmenistan through volatile territory in Taliban-held regions in Afghanistan and Balochistan in Pakistan to India. Analysts have speculated that Turkmenistan has been driven by a need to find new customers to pay for its gas, to make up for a sharp reduction in purchases by Russia's Gazprom, following price disputes and a drop in world demand last year.

At the meeting of heads of states at the UN General Assembly last week, Ashgabat mounted an ambitious five-part peace proposal making TAPI central to a concept of Afghan reconstruction, to be achieved through UN-sponsored peace talks among the Afghan parties hosted in Turkmenistan. President Berdymukhamedov offered trade, humanitarian aid, and technical assistance in capacity-building, expressing hope that the construction of TAPI as well as a railroad would bring trade, jobs and ultimately stability to the region.

Last week, the energy ministers of the four countries met in Ashgabat to sign a framework agreement for the pipeline, and heads of state are slated to meet in either December or January 2011 to finalize the arrangements.

It has been difficult to tell from the state-controlled press in Turkmenistan just how far President Berdymukhamedov had actually gotten in convincing the other partners to get on board, as the countries have been arguing about TAPI's feasibility in various working meetings for years. In this still-closed society, the Turkmen leadership has a tendency never to divulge its plans about foreign energy partners, merely reiterating a mantra about "diversifying routes to foreign markets". An explicit commitment to the Western-backed Nabucco pipeline has never been articulated, although for the first time last week, Ashgabat inched forward to make more direct references to including Nabucco as a pipeline to be fed by its domestic East-West pipeline currently being built by state companies.

Yet on TAPI, President Berdymukhamedov has been more forthcoming than on any other project, except, of course, the pipeline to China, arranged through a $4 billion soft loan last year and already completed.

The question, then, was to assess how much the Turkmen leader's highly-publicized phone calls and meetings with the other three partners were really as convincing as portrayed in the state media.

Now, India, arguably the country among the four with the most free press, has spoken up clearly, despite past misgivings, and appears to be four-square behind TAPI.

At last week's meeting of the TAPI energy ministers in Ashgabat, the project grew closer to fulfillment, as officials of the Indian Petroleum and Natural Gas Ministry said the decision was made to "engage a global energy giant" after Afghanistan and Pakistan promised to secure the pipeline through their territories. A meeting to finalize TAPI will be convened by Pakistan in December or January 2011.

The 1,680 pipeline includes 145 kilometers in Turkmenistan from the Doveletabad gas field, then crosses 735 kilometers through Afghanistan, and 800 kilometers in Pakistan. With the security difficulties, the cost, originally calculated by the Asian Development Bank at $3.3 billion may double to as much as $7.6 billion, said the India Times.

Jitin Prasada, Indian minister for petroleum and natural gas told India Times that while "significant progress" was made on TAPI there are still "many issues" to resolve such as transit fees and the formation of a consortium to address security issues, but progress is expected at the next meeting as India believes these assets to be "critical" for its energy security.

The decision to arrange to "rope in a global energy major" as the India Times characterized it, was made after both Afghanistan and Pakistan made security pledges, two senior officials with direct knowledge of the deal told India Times. The Afghans plan to run the pipeline underground, and also pay local communities to guard it.

India and Pakistan will split about 75 percent of the 90 million cubic meters of gas per day to be delivered between them with the balance going to Afghanistan.

The TAPI partners agreed that in the case of a single bid, the bidder will be awarded the project, India Times reported. The company could come from the U.S., Russia, or any other country, a senior official at India's ministry of petroleum and natural gas was quoted as saying. The energy giant would help in "derisking" the project as well, said the official.

Prasada has identified four elements essential to the project's success: a) minimal transit fees; b) proper address of security issues; c) complete clarity on institutional mechanisms; and d) agreement on pricing issues before going further, livemint.com reported.