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Murky politics of gas

November 20, 2011


THE latest developments on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) and the Iran-Pakistan (IP) gas pipeline projects are such that it may shape into an either-or situation.

While work on the IP pipeline is expected to be completed ahead of schedule, the United States-backed TAPI project has also been expedited. Pipeline politics appear to have come into play. At the moment, the US is in favour of TAPI, Russia and China for IP, India is in a ‘wait and see’ mode and Pakistan seems to be running with the hare and hunting with the hounds.

Pakistan and Turkmenistan recently reached a deal on a gas sale-purchase price for the $7.6bn TAPI pipeline project, scheduled to be completed by 2016. Under the deal, Turkmenistan will deliver 1.3 billion cubic feet a day of gas at 69 per cent of the crude oil parity price, which is much lower than the gas rate of 78 per cent of crude price Islamabad agreed to with Tehran under the IP gas pipeline deal.

The deal on the TAPI pipeline has come at a time when Tehran and Islamabad have expedited efforts to execute the IP gas pipeline, a project that is strongly opposed by the United States. Pakistan has begun to dither on the IP project as Washington stiffens its opposition, pushing Islamabad to accept TAPI as an alternative to the gas pipeline from Iran.

Last year, Turkmenistan, Afghanistan, Pakistan and India initialled the Gas Pipeline Framework Agreement in Ashgabat. The proposed 1680km TAPI pipeline will start from Daulatabad field in Turkmenistan and end at Fazilka settlement at the border of India and Pakistan. The pipeline will have to pass through war-torn Afghanistan as well as insurgency-hit Balochistan in Pakistan. Security in the volatile Afghanistan has been the key issue related to the execution of the TAPI project.

Under the IP deal, Iran will deliver about 750 million cubic feet of gas per day to Pakistan by the end of 2014. After India’s withdrawal from the project in 2009, Iran and Pakistan decided to implement the project bilaterally. The IP project is pressing ahead of schedule despite the American opposition.

Federal Minister for Petroleum Dr Asim Hussain recently said that a breakthrough in the project depends on an “understanding” with the international community. Some analysts even claim that during Secretary of State Hillary Clinton’s visit to Pakistan last month, Washington and Islamabad reached a deal due to which Islamabad is dithering on the IP gas pipeline project.

Pakistan is dithering at a time when all issues relating to the IP project between Islamabad and Tehran have been settled, including gas sale and purchase agreement (GSPA) and third-party certification for the uninterrupted supply of gas from the source field to Pakistan for 30 years.

The price difference of nine per cent between Turkman and Iran gas not only provides an opportunity to Pakistan to renegotiate price with Iran but also opens a window for the country to abandon the IP agreement without paying penalties in case UN sanctions are imposed on Tehran.

Washington’s advice to shelve the IP pipeline project is hardly sound. How can Pakistan go back on the Iran deal when it faces chronic gas shortages itself and its own proven gas reserves are known to be dwindling? It would be folly to walk away from the IP project for an insecure and uncertain TAPI project.

Pakistan is, however, expected to go ahead with the IP project despite US opposition if China joins the project. China is not only interested in initially investing $2.5bn in the Pakistani part of the project but also in a gas pipeline extension to its territory. Around 1,100km of the IP pipeline will be built in Iran, while the remaining 1,000km will be set up in Pakistan. Last year, secretary of the Ministry of Petroleum, Kamran Lashari, disclosed that Pakistan is in negotiations with China for the availability of technical equipment for laying the IP pipeline.

Russia has been opposed to the TAPI project and backing the IP project. Russian gas giant Gazprom has also shown an interest in participating in the IP pipeline project. It was Gazprom that first proposed the project of building an underwater gas pipeline from Iran to India in 1997. Under the proposal, a gas pipeline would pass overland in Iran and India and underwater in its Pakistani section.

Moscow wants Turkmenistan’s gas to be firmly under its control and it has done everything it could to frustrate the TAPI pipeline project. Gazprom is said to have helped facilitate an abortive coup against the late president Niyazov (who had been very active in making the TAPI project a reality) in 2002.

India has reportedly shown interest in rejoining the Iran-Pakistan-India (IPI) gas pipeline project despite American opposition. India’s renewed interest in the IP project is a move to keep China away from the project, as after India’s withdrawal Beijing showed an interest in building an Iran-Pakistan-China (IPC) pipeline that provides it a chance of obtaining a secure overland gas pipeline. New Delhi, which is locked in an energy game with Beijing, is not willing to give China a chance to replace it in the IPI project.

The expected Chinese participation in the IP project would create a new overland energy link that could complement China’s energy diversification strategy, even though the project would face several political and logistical difficulties as the pipeline has to traverse the very difficult terrain of Gilgit-Baltistan and the restive Balochistan province.

The writer is a development analyst and has written a number of books including The Economic Development of Balochistan.