3 years

Energy

Pipeline of Peace

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The Turkmenistan-Afghanistan-Pakistan-India pipeline will likely test the political patience of some unlikely allies

On 11 December, India signed the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline deal to transport natural gas from Central Asia to South Asia, a deal Prime Minister Manmohan Singh calls a “Pipeline of Peace,” a curious choice of words for a conduit that begins in Turkmenistan and flows through Afghanistan and Pakistan before entering Indian Punjab. The pipeline replaces the Iran-Pakistan-India (IPI) gas pipeline, which India seems to have unceremoniously dumped in exchange for the Indo-US Nuclear Deal.

For partners in the peace pipeline, the upside is huge. The 1,680 km pipeline—which is projected to cost $7 billion and expected to take six years to complete—helps Turkmenistan find markets clear of Russian interference. (In April 2009, Russia shut off a pipeline flowing between itself and the former Soviet Central Asian republic, bursting the pipeline.) For  Afghanistan, the pipeline provides employment and assures the government transit fees. The recipients of the gas, India and Pakistan, gain much needed energy security.

Securing passage of the gas, however, will be challenging. The TAPI project could potentially be sabotaged by Islamist extremists in Pakistan, Afghanistan, or both.

Besides the volatile route the pipeline will traverse, its economic viability is also questionable. Turkmenistan has committed to provide India 13 billion cubic metres (BCM) of gas per year. If India pays the $10 per unit as rumoured—analysts say the price includes $7.5 per unit for the gas (the same fee that Turkmenistan charges China for piped gas) and an additional $2.5 per unit for transit fees and other charges—it  won’t match the $8.5 per unit India currently pays for imported liquefied natural gas (LNG). Assuming that America’s success in shale gas production continues to depress global gas prices, India should be able to negotiate a lower per unit rate from Turkmenistan. Otherwise, India will only gain strategic depth in Central Asia and not lower-priced energy.  “Pricing of gas would be a challenge,” admits one analyst with knowledge of the project. But he adds that pipelines are “seen as a more reliable and secure mode for transportation than LNG”. 

In the case of the scuttled IPI project, India and Iran tussled over price. India was adamant on paying $5 per unit, while Iran demanded $7.5. “India should have a flexible approach, [to] see to it that pricing negotiations do not stall the project, as India needs energy,” says Arvind Mahajan, a senior energy analyst for KPMG. 

Either way, it’s clear that as India’s energy needs grow, the country will be forced to seek energy from some decidedly unsavoury regimes. The “pipeline of peace” will also likely test the political patience of some unlikely allies.