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    South Asia
     Dec 14, 2010

India backs gas link across Afghanistan
By Syed Fazl-e-Haider

KARACHI - Proposals to build a US$7.6 billion natural gas pipeline, known as TAPI, running from Turkmenistan through Afghanistan and Pakistan to India, have been rejuvenated with New Delhi throwing weight behind the scheme.

The four countries at the weekend signed broad agreements to move forward with the complex and high-risk plan to build the pipeline across rugged territory plagued by war and terrorism.

The 1,680 kilometer TAPI gas pipeline, scheduled to be completed by 2013-14, would bring 3.2 billion cubic feet of natural gas per day (bcfd) from Turkmenistan's gas fields to Multan in Central Pakistan and end in Fazilka, an Indian city near the India-Pakistan border.

The route would go through insurgency-wracked areas of


Afghanistan and Pakistan, but if it proceeds to completion the project is expected to bring millions of dollars in transit fees for Afghanistan and Pakistan.

Kabul is confident that the pipeline will implemented, according to Afghan Mines Minister Wahidullah Shahrani. "We will be earning a transit fee of hundreds of millions of dollars each year that will create tremendous job opportunities," he said.

At the same time, Asian Development Bank president Haruhiko Kuroda recognized the difficulties that lie ahead. "This will not be an easy project to complete. It is mandatory that we guarantee the security of the pipeline and the quality of construction work," the Associated Press (AP) reported Kuroda as saying.

Though the TAPI project has won vocal support from the United States, analysts believe it will be a challenge to secure financial backing and firm bids from energy companies for a project so fraught with potential risks. At the same time, its prospects may be brighter than those for a proposed Iran-Pakistan (IP) pipeline project, which might also feed India. The US, which is seeking to isolate Iran due to concern that it may be seeking to develop nuclear weapons, has asked Islamabad to abandon this project and seek alternatives to meet its severe energy shortage.

The presidents of Turkmenistan, Pakistan and Afghanistan on Saturday met for the first time in the Turkmen capital, Ashgabat, to discuss the TAPI project. India was represented by Energy Minister Murli Deora, filling in for Prime Minister Manmohan Singh who was on a visit to Europe. They signed an agreement under which the four nations committed to providing government support, including security for the pipeline.

The contents of the document signed by Afghan President Hamid Karzai, Turkmenistan President Gurbanguly Berdimuhamedow, Pakistani President Asif Ali Zardari and Deora were not immediately made public. While a Gas Pipeline Framework Agreement (GPFA) was signed, no deal was reached on future sales or the consortium for the construction tender.

The project was initially designed to provide Turkmen gas to Pakistan through volatile Afghanistan under an agreement signed in May 2002 in Islamabad. India was invited to join in April 2008. The gas will come from the South Yolotan-Osman and adjacent gas fields, after participating countries agreed in August to switch from an earlier proposal that the gas come from Douletabad and nearby fields.

Last month, US deputy Assistant Secretary of State Susan Elliott, speaking at an energy conference in Ashgabat, said the pipeline could boost stability across the war-torn region.

In Afghanistan, the pipeline would run from western Herat, near the Iranian border, through the southern Taliban heartland of Helmand and Kandahar, presenting the authorities involved with daunting security and economic challenges. While the cost of the project was previously estimated at $3.3 billion, it may run as high as $10 billion.

"Central to the agreement is the issue of security, with Turkmenistan apparently not liable for any shortfall or disruption in supply, which would infer that the onus is on each of the transit states to secure the pipeline," Reuters reported Goodbody Stockbrokers analyst Gerry Hennigan as saying.

The negotiations on TAPI project have been in progress for over 15 years. Turkmenistan, with the world's fourth-largest proven reserves of gas, is eager to find new markets, reducing its dependence on Russia, its traditional client.

Ashgabat has already increased gas supply to Iran and opened export routes to China, whose President Hu Jintao late last year launched a 7,000 kilometer pipeline to feed Turkmen gas to his country's burgeoning economy. Turkmenistan is also ambitious to build a pipeline that would feed Western Europe.

Under the TAPI deal, Afghanistan's share would be 500 million cubic feet per day (MMcfd), Pakistan 1,325 MMcfd and India 1,325 MMcfd. Turkmenistan would pump in around 33 billion cubic meters of gas per annum. The 1,680 kilometer pipeline includes 735 km across Afghanistan and 800 km through Pakistan, before culminating in India.

Pakistan's federal cabinet approved the GPFA in October this year. The country's demand for natural gas has increased by almost 10% over the past decade, until by mid-2009 demand exceeded available supply, with production of 4,528 MMcfd against a demand for 4,731 MMcfd, indicating a shortfall of 203 MMcfd.

Though Pakistani officials have hailed the agreement on TAPI, analysts say it may just be more wishful thinking, as the proposed pipeline would have to pass through not only Afghanistan - running alongside the Herat-Kandahar Highway - but also through Pakistan's insurgency-hit Balochistan as it passes from Chamman and Zhob on the way to Multan.

Pakistan in September proposed to Turkmenistan that it supply gas via Iran, instead of laying a pipeline through war-torn Afghanistan. The proposed alternative western route could reduce the length of gas pipeline to 1,490 km from the 1,680 km of the Herat-Kandahar route.

Energy-deficient Pakistan wants quick implementation of the pipeline from Turkmenistan, particularly after the possibility of building the Iran-Pakistan link was reduced as a result of sanctions imposed by the United Nations and the US on Iran's energy sector due to concerns over Iranís nuclear ambitions.

Even so, on May 28, Islamabad and Tehran signed a sovereign guarantee agreement to start physical work on the IP pipeline, making effective a Gas Sales Purchase Agreement (GSPA) signed by the countries last year in Istanbul. Under the GSPA, Iran agreed to export 750 mmcfd with a provision to increase it to one billion cubic feet a day (bcfd) at the rate equal to 78% of crude oil for the next 25 years.

A senior diplomat attached to the Permanent Mission of India to the UN reportedly said on Saturday that India had not abandoned the Iran-Pakistan-India pipeline project and was seriously looking for courageous insurance companies to underwrite the project.

"Apart from what we see is happening in the world today, we need Lloyds or other major global insurance giants setting up a new division and undertaking the risk so that we can start the project," the Associated Press of Pakistan reported, citing an Indian television channel that quoted the diplomat.

India imports nearly 25% of its gas needs, which could rise to 50% by 2020 unless new domestic sources of energy are developed. It imports the bulk of gas in the form of liquefied natural gas from Qatar and Algeria. With the prospect of buying gas from Iran at present doubtful, India has been looking at options from Myanmar, Central and West Asian countries and Russia.

(With additional reporting by Siddharth Srivastava in New Delhi.)

Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at [email protected]

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