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Hurdles Remain For TAPI Gas Project

A pipeline through some of the more dangerous areas in the world needs financing. Are Turkmenistan, Afghanistan, Pakistan, and India overly optimistic?
A pipeline through some of the more dangerous areas in the world needs financing. Are Turkmenistan, Afghanistan, Pakistan, and India overly optimistic?
By Abubakar Siddique
The signing of a gas sale-purchase agreement brings the construction of the TAPI natural-gas pipeline project closer to reality. But while the deal has revived hopes for the much-delayed project that would supply Pakistan, India, and Afghanistan with Turkmen gas, many obstacles remain.

Insecurity

Regional instability has long haunted the Turkmenistan, Afghanistan, Pakistan, and India (TAPI) project, first conceived 18 years ago, and that remains the main obstacle to the pipeline becoming a reality.

The planned route of the 1,800-kilometer pipeline would wind through 735 kilometers of southern and western Afghanistan -- hotbeds of the Taliban insurgency in the country.

Now, with NATO leaders this week describing the transition of security oversight to Afghanistan as "irreversible," questions over the country's ability to maintain peace on its own loom large. This casts a pall over the prospects of building a multibillion-dollar pipeline in some of the county's most volatile regions.

The pipeline will also pass through Pakistan's southwestern Balochistan Province, where thousands have died in separatist and sectarian violence during the past nine years.

Officials in Islamabad say the government has wisely diverted the pipeline through the province's relatively stable northern Pashtun regions, but the pipeline could still be vulnerable to sabotage. Poorly guarded gas pipelines have been a favorite target of ethnic Baluch separatists fighting against the Pakistani military.

Regional Rivalry

Saqib Sherani, a former adviser to Pakistan's Finance Ministry, says the construction of the pipeline could also be hampered by regional and global rivalries.

Washington, which has backed the TAPI initiative since the mid-1990s, has recently pushed Islamabad and New Delhi to withdraw from discussions with Tehran over a suggested Iran-Pakistan-India pipeline that would serve as a rival to TAPI.

In March, U.S. Secretary of State Hillary Clinton said Pakistan could face "damaging" consequences from the United States over the project.

Nevertheless, Sherani suggests that Pakistani policymakers might still prefer an Iran-Pakistan-India pipeline over TAPI.

The "feasibility of the [TAPI] project is something that a lot of Pakistani officials are skeptical about," he notes. "And secondly, we find in our interest the Iran-Pakistan pipeline, especially if India is involved. It is much more feasible and can be done much quicker."

While India and Pakistan are now looking to boost trade ties, the two have fought several wars and are still involved in simmering border conflicts. An unexpected rupture in their relations could easily put TAPI on the back burner once again.

Where's The Money?

The Asian Development Bank has dubbed TAPI the "peace pipeline," and has provided a few million dollars in technical assistance, but more -- much more -- is needed.

Sherani says that none of the four TAPI partners has pledged solid funding to build the pipeline. As costs rise, the financing problem grows -- estimated in 2008 to cost $7.6 billion, the project is now estimated to cost up to $12 billion.

Some U.S. officials have hinted that major energy companies might be interested in financing the project, but Sherani is doubtful. He says few investors will be eager to finance a pipeline going through an unstable Afghanistan.

"I think it is going to be a big challenge because no consortium is really going to start work or put their money where their mouth is until the Afghan situation settles down," he says. "It is a huge commitment and no [financier] is going to tie down their financial resources in an open-ended manner."

Loose Ends

The bottom line for TAPI, according to Sherani, is whether Pakistan and India determine that the price benefits outweigh their investment.

And finally, while Afghanistan has signed a memorandum of understanding on future gas cooperation with Turkmenistan, it is still not technically on board. When the two countries finalize a gas sales and purchase agreement, that will clear yet another hurdle.
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Comments
     
by: noor from: hyderabad,india
June 10, 2012 11:06
well in every angle if u see from the cost point of view,and and how much the gas is available after completing of the project is still in dilema,
welll if u see iran-pakistan-india gas pipeline it's more feesible in every aspect, but here the major hurdle is of us iran relationship,
In Response

by: ahmed from: ph
June 16, 2012 04:46
Noor Sahib is right . It is the USA that is not in favour of the Iran_Pakistan-India pipeline . This is linked to the ongoing US-Iran tensions.

How much will the actual cost of the delivered product be ?

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