May 23, 2012 / 7:08 AM / 7 years ago

Turkmenistan in deals to pipe gas across Afghanistan

AVAZA, Turkmenistan (Reuters) - Turkmenistan agreed on Wednesday to supply natural gas to Pakistan and India in deals that offer major economic benefits to all three countries but depend on building and defending a U.S.-backed pipeline across chronically unstable Afghanistan.

The route, particularly the 735-km (450-mile) leg through the Afghan provinces of Herat and Kandahar, will need billions of dollars in funding. It presents significant security problems as the Western NATO alliance plans to hand control of Afghanistan to its own security forces by the middle of next year.

Turkmenistan’s state gas company Turkmengaz signed gas sales and purchase agreements with Pakistan’s Inter State Gas Systems and Indian state-run utility GAIL.

“The implementation of this project will give a powerful impetus to the social and economic development of all the participant countries,” Turkmen Deputy Prime Minister Baimurad Hojamukhamedov said before the signing ceremony held in the resort area of Avaza on the Caspian Sea.

India and Pakistan are both hungry for gas supplies and Turkmenistan, formerly part of the Soviet Union, is keen to free itself from reliance on gas exports to Russia.

The idea of the TAPI pipeline, an acronym formed from the initials of the four countries through which it would pass, was first raised in the mid-1990s but construction has yet to begin.

“This is a truly historic moment of unparalleled regional cooperation,” Klaus Gerhaeusser, director general of the Central and West Asia Department at the Asian Development Bank (ADB), said in a statement.

The ADB has acted as the TAPI Secretariat since 2002.

“The pipeline represents a win-win scenario for each TAPI country,” Gerhaeusser said. “Each country stands to gain, making this not only the ‘Peace Pipeline’, but a pipeline to prosperity as well.”

Turkmen officials have said the proposed 1,735-km (1,085-mile) pipeline could carry 1 trillion cubic meters of gas over a 30-year period, or 33 billion cubic meters a year.

SECURITY AND COSTS

The major obstacle to the project is stretch of the pipeline that will run through Afghanistan. The Western NATO military alliance set an “irreversible” course out of Afghanistan on Monday but U.S. President Barack Obama admitted its plan to end the deeply unpopular war in 2014 was fraught with dangers.

A NATO summit in Chicago endorsed an exit strategy that calls for handing control of Afghanistan to its security forces next year but left questions unanswered about how to prevent a slide into chaos and a resurgence of the Taliban after allied troops are gone.

A U.S. official estimated in March that the pipeline could cost between $10 billion and $12 billion to construct.

Daniel Stein, senior adviser to the U.S. State Department’s special envoy for Eurasian energy, also said that two major U.S. oil companies were interesting in participating in the project. He declined to name the companies.

Turkmenistan is also promoting the TAPI pipeline as a key element in plans to boost annual gas exports to 180 billion cubic meters by 2030.

BP data show Turkmenistan’s natural gas reserves equal to those of Saudi Arabia and behind only Russia, Iran and Qatar.

The country aims to supply gas from its Galkynysh field, better known by its previous name, South Iolotan. Auditor Gaffney, Cline & Associates has ranked the field the world’s second largest, with gas reserves of between 13.1 trillion and 21.2 trillion cubic meters.

The Indian government said in a statement on May 17 that the pipeline would be operational in 2018. India and Pakistan would each get 38 million cubic meters per day (mcmd) of gas, while the remaining 14 mcmd would be supplied to Afghanistan, it said.

Separately, an Indian Oil Ministry official said last week that the transit fee for the gas had been fixed at about 50 cents per million British thermal units (mmBtu).

India, Asia’s third-largest oil consumer, imports about 80 percent of its oil needs while falling local gas output has forced it to buy costly liquefied natural gas.

Analysts say that India’s own gas production will not be able to keep pace with its rising demand for the fuel.

“Over the period of 2028 to 2035, Indian gas demand will triple to around 190 bcm,” Ulrich Benterbusch, director of the Global Energy Dialogue at the International Energy Agency, told an international energy conference in Uzbekistan last week.

Reporting by Marat Gurt; Writing by Dmitry Solovyov; Editing by Anthony Barker

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