TAPI pipeline: government likely to renegotiate gas price

Pakistan is likely to renegotiate gas price of much talked- about Turkmenistan- Afghanistan- Pakistan-India (TAPI) pipeline with M/s Turkmengaz, well informed sources told Business Recorder. For this purpose, an inter-ministerial committee is to be constituted so that the price of gas can be brought down.

TAPI gas pipeline project aims to bring natural gas from the Galkynish and adjacent gas fields in Turkmenistan to Afghanistan, Pakistan and India. For implementation of the project, Inter-Governmental Agreement (IGA) and Gas Pipeline Framework Agreement (GPFA) were executed on December 11, 2010 after approval the Federal Cabinet.

The Gas Sale and Purchase Agreement (GSPA) between Inter State Gas System Limited (ISGSL) and Turkmengaz for the supply of 1.3 bfcd gas to Pakistan was signed in 2012 wherein the pricing of the gas was determined and agreed with Turkmengaz.

There has been a considerable delay in the project's execution, as a result of which Pakistan had to explore alternate avenues to fulfill its growing gas demand including alternate energy projects which are underway. As the energy scenario evolved over these years, the competitiveness of the gas price under the GSPA, agreed seven years ago, needs to be reviewed to reflect the current energy scenario and retain its viability.

ISGS through a letter of March 21, 2019 has communicated its intent to discuss and renegotiate the gas price with Turkmenistan. In the recent communiqué, Turkmengaz has confirmed its intent to consider discussion on the TAPI gas price. The intent to renegotiate the pricing of gas also been communicated by the Special Assistant to Prime Minister( Petroleum Division) to his counterpart in Turkmenistan and Turkmengaz during his visit to Turkmenistan.

The source said, since the proposed negotiation will involve considerable commercial exposure including facilitation by the GoP, Petroleum Division has proposed that a Price Negotiation Committee (PNC) may be constituted for the purpose of renegotiating the gas price with Turkmengaz.

The proposed renegotiation committee will comprise of Secretary Petroleum (Chairman), Secretary Finance or his nominee( Member), Additional Secretary, Power Division(Member), Director General (Gas)( Member/ Secretary), Managing Director, SNGPL(Member ) and Managing Director SSGCL ( Member).

On September 15, 2019 it was reported that construction work on TPAI gas pipeline will commence from January 2020 from Pakistan side, despite growing tensions between Pakistan and India.

An official was also quoted as saying that construction work has already started in Turkmenistan and Turkmen-Afghan border to Herat section work is expected to start soon.

European banks and firms have been short-listed for provision of pipeline material and EPC contract. "TAPI Company is responsible for execution of this project; however, Pakistani companies are assured to get maximum share in the work for the activities within Pakistan," managing director of Inter-State Gas Systems (ISGS) said. He said that a delegation of TAPI Company will visit next month to review the progress of the project and finalize the plan for the construction activities. Pakistan and India would receive 1.3 billion cubic feet gas per day each.