“The historic event unfolded when Chabahar Port in Iran’s Sastan-Baluchistan province was inaugurated with buzz and fanfare. The port is developed by India with support from Iran and Afghanistan. The landlocked Afghanistan exclusively depended and heavily relied on the mercy of Pakistan for its trade with India. The road link passed through Pakistan, which used to close down the link at its sole wish and whims, while truckloads of goods, from and to Afghanistan, queued up for an indefinite period.”
Quick Snapshot: India’s Gas Demand
India needs a huge volume of energy to cater to the needs of fast growing economy. Strategically, India is not gifted with natural energy resources as compared to its population. It supports around 17 percent of the world population but has only 0.3 percent of oil, 0.8 percent of natural gas and 6.8 percent of the world’s, oil, and gas and coal reserves, respectively. Hence India has been striving hard to increase energy supply by exploiting all possible sources of conventional and non-conventional energy domestically as well as globally to meet the demand for energy for a sustainable economic growth.
India’s policy to shift to cleaner fuel has resulted in increasing demand for natural gas during the last decade. The apparent consumption for India’s gas was estimated at 4.9 bncf (billion cubic feet) in 2015 and it is projected to reach 12.8 bncf per day by 2035, a growth of 162%.
India has limited gas reserves to meet its requirement and so it is largely dependent on Imports. India, since long has been striving for commercially viable, long term, uninterupted, supplies of natural gas. Iran has the largest gas reserves in the world with 1,200 trillion cubic feet (TCF) followed by Russia (1,152 TCF), Qatar (866 TCF), US (345 TCF), Saudi Arabia (288 TCF), Turkmenistan (617 TCF) and UAE (215 TCF). Besides trading with Qatar and Saudi Arabia on a limited scale, India is exploring possibilities to tap gas from Iran and Turkmenistan for which negotiations have been in progress for the last 20 years.
Importing LNG is a rather costly process, but unavoidable because the sources of gas are far away. This cost can be avoided if gas is imported through pipelines. Hence India on its own or with exporting countries started working on different transnational gas pipeline projects like 1) Iran Pakistan India 2) Turkmenistan Afghanistan Pakistan and India 3) India Bangladesh &Myanmar 4) Oman India Deep Sea Water Pipeline. However, these projects have been fraught with uncertainty due to several risks associated with them, including security, strategic, political and commercial reasons.
Key Transnational Gas Pipeline Projects
Iran – Pakistan – India (IPI)
The concept of Iran-Pakistan (IP) pipeline project, formerly known as Iran-Pakistan-India (IPI) (also called Peace Pipeline) pipeline originated in early 1989. India joined the group in 2005 and subsequently in 2007, India and Pakistan provisionally agreed to pay Iran US$ 4.93 for per mmbtu of natural gas.
Iran-Pakistan (IP) pipeline project was aimed at laying 1,724 miles (2,775 kms) pipeline from Iran’s South Pars fields in the Persian Gulf to Pakistan’s major cities of Karachi and Multan and then further to Delhi, India. Considering that Iran has the world’s largest gas reserves, it can be a convenient supplier of gas to both India and Pakistan. Iran had also offered to bear 60 percent of the construction cost of the pipeline.
The pipeline was expected to carry 150 mmscmd natural gas to be shared equally between India and Pakistan. The annual capacity of the gas pipeline will be 40 billion cubic meters. India however, withdrew from the project over pricing and security issues in 2009, and after signing a civilian nuclear deal with the United States in 2008. Though later, in March 2010 India called on Pakistan and Iran for trilateral talks scheduled to be held in May 2010 in Tehran, which have not taken place so far. The IPI or peace pipeline was always uncertain because geo political uncertainty and rivalry between India & Pakistan. Hence new idea came to bypass Pakistan and lay Deep Sea Gas Pipeline.
Turkmenistan – Afghanistan – Pakistan & India
The proposed TAPI or Trans-Afghanistan Pipeline is a natural gas pipeline being developed by the Asian Development Bank (ADB). The ADB conducted a feasibility study and gave a favourable opinion for the project in 2005. The proposed pipeline is expected to transport natural gas from the Caspian Sea in Turkmenistan through Afghanistan and Pakistan to India. Following an approval by the Indian cabinet, India became the fourth country to join the project in 2008.The TAPI project was originally expected to start in 2012 and come on stream by 2016. It envisaged laying 1,680 km of pipeline with a total gas capacity of 90 mmscmd. As per the plan, 38 mmscmd will go to India and Pakistan each, while 14 mmscmd would be bought by Afghanistan. The government of Afghanistan is expected to gain around 8% of the revenue of the project.
TAPI has been under discussion since 1995, and India was formally admitted in 2010. It is designed to transport 33 billion cubic meters of gas annually to South Asia for a period of 30 years. Many giants have backed out due to several security & financial concerns.
Hence, a consortium was formed and Turkmengaz, the national gas company of Turkmenistan and the largest gas company in Central Asia, was made the consortium leader with a stake of 85% along with Gas Authority of India Limited (GAIL) as Indian partner, InterState Gas Systems (Private) Limited (ISGS) of Pakistan and Afghan Gas Enterprise (AGE) with stakes of 5% each.
Approximately 1200km of the pipeline will pass through Turkmenistan, 735km through Afghanistan, 800km from Pakistan and will reach Fazilka in Punjab state of India. India currently is an energy hungry nation and has committed to the TAPI Pipeline – a project worth $8.7 billion, and was expected to be completed by December 2019 and pump natural gas from Turkmenistan to South Asia. But with geopolitical challenges, specifically on security concerns of pipeline travelling through Taliban’s strong hold, many investors have also shown diminishing interest. Only recently there was a positive move when meeting between Deputy Prime Minister and Foreign Minister of Turkmenistan Rashid Meredov and Minister of State for Petroleum and Natural Gas Dharmendra Pradhan took place to push forward the proposed pipeline.
3. Middle East India Deep Water Gas Pipeline
South Asia Gas Enterprise (SAGE), part of the Siddhomal Group, has proposed in building a series of subsea pipeline from the Middle East, to bring natural gas to Indian market (MEIDP). Feasibility study of the project to bring natural gas to India through subsea pipelines is underway. The 1400 km under-sea pipeline reaching a depth of 3400 meters will start from Iran (Chabahar Port), through Gulf Region (Oman Sea) to the Indian Coast in Gujarat, with a spur line to Mumbai in the later stage.
As per the undersea pipeline proposal, which is still under discussion, SAGE will lay the 1,400-km pipeline bypassing the exclusive economic zone (EEZ) of Pakistan. It will carry 31.5 million cubic meter gas per day and will be built in two years after finalization. Currently, negotiations are underway between Iran and SAGE for the construction of the under-sea line.
Linking the Middle Eastgas fields with India across the Arabian Sea for an offshore distance of 1300 kilometers and maximum water depth of 3400 meters, the SAGE gas transmission pipeline is expected to transport up to 1.1BSCFD gas into the Indian energy markets, or 8TCF over the next 20 years.
Last status suggests that during fag end of 2017, Oman, Iran and India discussed the issue of gas pipeline at trilateral meeting in New York to push the deep sea pipeline project.
4. Myanmar Bangladesh & India Pipeline project
An ambitious gas pipeline project with Bangladesh and Myanmar has been revived after getting mothballed twice in the last decade. India, Bangladesh and Myanmar are now reconsidering the pipeline plan connecting the three nations.
7,000 kms of pipeline would be required for the gas grid, which could be used by all the three countries. The pipeline project had figured during Prime Minister Narendra Modi’s talks with his Bangladesh counterpart Prime Minister Sheikh Hasina two years back. Officials said GAIL, ONGC and Bangladesh Petroleum Corporation held preliminary talks.
India had proposed a cross-country gas pipeline in the first half of the last decade to evacuate gas pumped out from offshore fields in Myanmar was awarded to Indian companies. The then government in Dhaka under Khaleda Zia had not agreed to the proposal. However with change in guard in India as well as Bangladesh and improved bilateral talks among the two countries helped India to push forward the most talked transnational gas pipeline.
India to Operate Iranian Port
As per the MoU signed between India and Iran, India is to equip and operate two berths in Chabahar Port Phase-I with capital investment of USD 85.21 million and annual revenue expenditure of USD 22.95 million on a 10-year lease.
Ownership of the equipment will be transferred to the Iranian side on completion
of 10 years or for an extended period, based on mutual agreement. The Iranian side had requested for provision of a credit of USD 150 million in accordance with the MoU.
By gradually increasing capacity, Chabahar Port will open markets in Afghanistan and Central Asia to Indian products while bypassing Pakistan. The current capacity of the harbour after the expansion is reported to be 8.5 million tons of cargo annually.
What Next for Transnational Gas Pipelines?
Large scale cross-border projects involve strategic and foreign relations between countries in addition to domestic tax, regulatory and subsidy policies or loan guarantees. Thus, government stability and sovereign risk are likely to be the critical measures of risk. The problems relating to terrain can be overcome but the geo-political situations across nations still pose a major obstacle in the pipeline projects. Existence of well- defined, coherent /harmonious energy policies, enabling legal and regulatory framework are essential criterion for cross-border trade and investments.
With the oil prices falling down over last 3-4 years has dried up the investments or funds across the value chain of the oil & gas sector. Secondly, the smooth development of transnational pipeline projects largely depends on the influence of International majors. Another key point which is holding back the progress of transnational pipelines is the safety and security of the pipeline during both construction phase and operation phase given the geopolitical situation in host countries. Last but not least is the change of India’s energy policies towards Zero Petroleum Import country by promoting alternative fuels like Methane & Ethanol based transport sector and wind & solar based power sector in India. In this backdrop, we foresee a little development in transnational gas pipeline projects during coming decade.