TAPI gas pipeline project: appointment of 'Transaction Advisor' proposed

As all stakeholders agreed to start first flow of gas in 2016, the technical teams of all participating countries have proposed to appoint 'Transaction Advisor' with a mandate to form consortium of investors to raise funds for the multibillion dollars Turkmenistan-Afghanistan-Pakistan and India (TAPI) gas pipeline project after signing of Gas Sales Purchase Agreement (GSPA), Business Recorder has learnt.
The Asian Development Bank had proposed to start first flow of gas from Turkmenistan in December 2018 under TAPI gas pipeline project that was rejected by all participating countries: Afghanistan, Pakistan, India and Turkmenistan. During the three-day technical level talks of Technical Working Group (TWG) on TAPI project, which concluded on Friday, Afghanistan, Turkmenistan and India supported the proposal of Pakistan to start first flow of gas in June 2016 instead of December 2018 projected by ADB fearing that further delay could cause escalation of cost to $9 billion against current estimates of $7.6 billion.
Turkmenistan, Afghanistan, Pakistan and India also decided to meet on April 25-27 followed by Ministerial level meeting on TAPI gas pipeline project on April 28, 2011 in New Delhi to negotiate GSPA and develop consensus on gas transit fee. "We have discussed the specifications of gas to be imported from Turkmenistan according to requirements of different countries," sources said, adding that no discussion was held on GSPA and transit fee related issues. GSPA on TAPI is expected to be signed till April 30, 2011.
"We have discussed contents of sulphur, nitrogen and discount rates in line with specifications of gas to be imported from Turkmenistan under TAPI gas pipeline project," the sources said adding that other technical issues like pressure of gas were also discussed. The pipeline size will by 56 inches.
Sources maintained that it was decided to appoint transaction advisor within three to four months and ADB would play a role of co-ordinator to this effect. "The role of transaction advisor will start after signing of GSPA till ownership of gas pipeline and its maintenance. Advisor will work to find out interested parties to finance the project," sources said adding that ADB will also provide the funding to carry out the project.
During the second week of February last, all participants had failed to reach any firm conclusion regarding 'gas pricing formula' to finalise GSPA due to different proposals. Different proposals were submitted during the talks to finalise GSPA and technical teams of participating countries had assured to respond on different price proposals discussed during negotiations after consulting their respective governments.
Pakistan had proposed to keep 'uniform' price of imported gas for all countries including Afghanistan and India and emphasised that transportation charges and transit fee should not be made part of the price. Pakistani side also opposed linking of gas price either with Liquefied Petroleum Gas (LPG) or crude oil and also insisted on linking it with domestic gas price. India had come up with a demand to link gas price with 'coal'. During the TWG meeting held in April 2007 in Ashgabat, the Turkmenistan side proposed the gas pricing formula that contained gas price at Turkmenistan border to be adjusted every three months and base price was suggested equal to Liquefied Natural Gas (LNG) landed in Pakistan.
Both Pakistan and India had expressed concerns on the proposed formula and did not agree with the base price of gas equal to delivered LNG prices in Pakistan. The concept of a substantial discount on LNG prices was discussed, in order to justify investment and risk of building a cross border pipeline. Due to delay in the TAPI gas pipeline project its cost has raised to $7.6 billion, against the earlier projected cost of $3.3 billion in 2004.