TAPI demands realistic approach

And the Gas Sales and Purchase Agreement (GSPA) has finally been inked between Pakistan and Turkmenistan on the much-hyped TAPI gas pipeline deal. The government is obviously claiming it as a key milestone towards the completion of the project, but experts opine that this is an overly simplistic view of the complex proceedings that await the fate of the TAPI deal. There is no denying that Pakistan direly needs more energy resources and imported gas is one key element in Pakistans future energy mix if the country has to ensure energy security. The roots of the project date back to 1995, yet the progress have just reached the GSPA level, which highlights the snails pace of the proceedings. Pakistan is expected to be a recipient of 1.3 billion mmcfd of natural gas if and when the TAPI deal starts operating, which, in the best case scenario, would not be earlier than 2016. Turkmenistan is a renowned exporter of natural gas, to Russia and Iran, and China is soon to be added to the list. Its gas reserves according to the EIA stand at 100 trillion cubic feet. The critical element that the Pakistani side will have to examine before striking the deal is the cost of imports, which the critics argue will carry heavy security premiums because of the pipeline route which passes through sensitive areas of Afghanistan and Pakistan. The price that China struck with Turkmenistan for its gas import deal could well be an indicator of how much Pakistan could end up paying. China has reportedly struck the deal at $7.7/mmbtu, which already seems on the higher side. Remember that Pakistan had long been bargaining with Iran on the IP gas pipeline deal over a much lesser price. Given the security premium and the linkage cost in TAPIs case, experts believe Pakistan may end up agreeing on $11~12/mmbtu, because of the heavy security premium and availability of alternative avenues for Turkmenistan. There is another angle to the story as well which suggests that TAPI is deliberately brought in limelight whenever there is some progress made over the IP gas pipeline project. Sources close to the IP deal told BR Research that some international forces do not want the IP deal to materialise, which is why Pakistan has been pushed into TAPI project, which will take a long time to commence operations and the economic viability also remains in doubt. "Now everybody will forget about IP and focus on TAPI which will bear no fruit. Even India is just buying time, TAPI is not feasible for India as it will cost them more than Pakistan. It is just doing what the US wants," told a seasoned industry expert close to the IP deal. If these words are to be believed, Pakistan may end up losing on both fronts and end up in a dire situation. One hopes that all the parties involved have good intentions and the deal does bear fruits, which is essential for Pakistans secure energy future. But Pakistan seems highly ill-prepared for that, as the cost differential between the imported and domestically produced gas is vast and needs to be reduced, without which, pipeline gas from TAPI or elsewhere will remain an elusive dream.