Integrating
regions as single economic units is a vision of the future economic development
paradigm, supported by international financial institutions and G-20 countries.
Connecting countries in a region for mutual trade in goods and energy is an
integral part of that vision.
Connecting
regional energy resources to consumption centres is nowhere as important as in
South Asia, which is home to about a third of humanity. Trade and energy go
hand-in-hand; South Asia, with its young population, can use geography to its
advantage in this regard.
The South Asian energy
corridor
Kazakhstan,
Turkmenistan, Uzbekistan, Kyrgyzstan and Tajikistan are all rich in oil and
gas. According to available data, they have a combined 8.2 billion tons of
proven oil reserves and 8.4 trillion cubic metres of natural gas reserves.
On
the other side, South Asia faces a deficit in energy, rapidly picking up on
economic growth. Connecting South Asian energy consumption centres to
energy-rich Central Asian states is a win-win solution. It can bring economic
growth to Central Asia through oil and gas revenues, and it can help South Asia
continue on the path of stable economic growth and prepare the subcontinent as
a future consumption market, which can support trade needed to sustain G-8
countries at the present level.
The
best ways to bring oil and gas to the Indo-Pak subcontinent from Central Asia
are the proposed pipelines (given on the map), some of which have been on the
global energy transportation map for more than two decades, with progress made
on paper only.
South Asian pipe dream
At
the moment, three principal gas pipelines can bring gas to the subcontinent.
These are the Turkmenistan-Afghanistan-Pakistan-India gas pipeline (TAPI), the
Qatar-Pakistan-India (QPI) submarine gas pipeline, and the Iran-Pakistan-India
(IPI) gas pipeline. The QPI, for a considerable portion, has to be laid down in
the seabed of the Arabian Sea. The option, at present, is too expensive to be
adopted. Even after completion, its estimated annual maintenance cost is a
considerable portion of the profit margin, and the host consortium may not find
it feasible to run.
This
leaves the region with the two other major options: the IPI and TAPI gas
pipelines.
TAPI
A
Memorandum of Understanding (MoU) was signed on March 15, 1995, between
Turkmenistan and Pakistan to build a gas pipeline from the Daulatabad gas field
in Turkmenistan to Multan in southern Punjab. US company Unocal, in consort
with Saudi oil company Delta, prepared to start work on the project. The two
companies later joined the CentGas consortium in which several international
petroleum companies joined in, including Russian petroleum giant Gazprom.
Later
on, in June 1998, Gazprom relinquished its share in the project, while Unocal
withdrew in August 1998 after attacks on American Embassies in Nairobi and
Darussalam. The project was then put on the backburner.
The
project has been revived after the US invasion of Afghanistan. The Asian
Development Bank has underwritten the project and provided risk guarantees on
investment. Despite that, there is little progress on ground. The future
remains bleak, unless there is stability in southern Afghanistan, which has
been under de facto Taliban rule for the past decades.
The
$7.6 billion pipeline, with initial capacity of 27 billion cubic metres of
natural gas per year, will deliver 2 billion cubic metres of gas to Afghanistan
and 12.5 billion cubic metres each to Pakistan and India.
IPI
The
proposed pipeline was designed to bring gas to Pakistan and India. The pipeline
can initially supply 22 billion cubic metres of natural gas per year, which was
expected to be raised later to 55 billion cubic metres per year. The project
was supposed to be commissioned by 2013 (this year) at a cost of $7.5 billion.
After reaching Multan, a spur line had been proposed, which would deliver gas
to India. Under the gas purchase agreement, Pakistan was supposed to get gas at
a price of $11 per million British thermal units (MMBTU). The price is $2 per
MMBTU cheaper than the TAPI pipeline gas, which costs $13 per MMBTU. The Iranian
gas is also $7 per MMBTU cheaper than imported LNG.
In
2008, after signing a civilian nuclear deal with the US, India withdrew from
the project.
Pakistan’s
federal government in January this year has approved a $1.5 billion
government-to-government deal with Iran for laying the 785-kilometre segment of
the pipeline in Pakistan. The federal cabinet has finally approved the project,
and a special committee has been formed to expedite it. The US has been quick
to register its concerns over the deal.
South Asian
consumption
In
Pakistan per capita natural gas consumption in 2010 was 229 cubic metres,
whereas in India this is as low as 55 cubic metres.
The
needs of the region are such that it can accommodate supply of gas from both
the proposed pipelines, but nothing can be achieved on ground unless there is
political and security consensus in the region; in which, in all probabilities,
the US remains an important stakeholder.
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