TAPI pipeline hits production sharing roadblock

The fate of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline hangs in the balance, despite recent progress and with construction expected to begin next year.

Turkmenistan has argued that its current laws do not permit the granting of production-sharing rights for onshore blocks to foreign companies. This has halted negotiations and restricted the number of foreign companies coming forward to build the pipeline.

Sunil Jain, India’s ambassador to Turkmenistan, recently conveyed to Petroleum Minister Dharmendra Pradhan that Ashgabat has ruled out signing a production-sharing contract (PSC) with any foreign company for extraction of gas from its fields. “The only possibility they are willing to consider is a consortium of national oil companies of all four participating countries, with Turkmengaz, the national oil company of Turkmenistan, as the consortium leader,” a source said.

Pradhan had recently visited Turkmenistan for the TAPI steering committee meeting. The pipeline is envisaged to wheel up to 33 billion m³/y of natural gas.

Recent developments

Recent moves have given TAPI a sudden burst of momentum. First, the four countries, with the Asia Development Bank as transaction advisor, set up a new company this month to “build, own, and operate” the 1800 km pipeline.

Registered in the Isle of Man, the TAPI Pipeline Company Limited will see Turkmengaz, Afghan Gas Enterprise, Inter State Gas Systems (Private) Limited, and GAIL (India) Limited with equal shares.

Second, a batch of recent high-level meetings have resulted in a handful of commitments. The four countries are said to have agreed to begin constructing the pipeline by 2016, with completion by the end of 2018.

No energy majors have yet signed up for the pipeline, though the field appears to be narrowing. ExxonMobil and Chevron recently pulled back from the project, rebuffed following their demands for shareholdings in the Turkmenistan gas fields supplying the pipeline.

As a result, France’s Total and Malaysia’s Petronas have suddenly appeared as frontrunners. Uzbekistan, likewise, has expressed interest in joining the pipeline.

Edited from various sources by Elizabeth Corner

Sources: Financial Express, The Diplomat

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