On Again, off Again Trans-Afghan Natural Gas Pipeline Revives

The ongoing saga of the proposed $7.6 billion, 1,040 mile-long Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline has more twists and turns than Vishnu has arms.

On 25 January TAPI was one of the main topics of discussions between Turkmen President Gurbanguly Berdymukhammedov and Afghan President Hamed Karzai, who arrived in Turkmenistan on a working visit. The two leaders met at the Caspian seaside town of Turkmenbasy. Altyn Asyr (Golden Age) TV reported that the pair reaffirmed the interest of both Turkmenistan and Afghanistan in increasing the tempo of implementing the project, highlighting the importance of the work of the TAPI Technical Working Group and Steering Committee.

One might wonder what the actual chances of constructing the pipeline are. The 56 inch diameter TAPI pipeline is tentatively scheduled to carry 27 billion cubic meters (bcm) of Turkmen natural gas a year from Turkmenistan's Dauletabad gas field across Afghanistan and Pakistan and terminate at the northwestern Indian town of Fazilka, with the pipeline's carrying capacity eventually expanding to 33 bcm.

Of TAPI's initial 27 bcm of natural gas per year, Afghanistan is slated to receive 2 bcm, while Pakistan and India will be provided 12.5 bcm apiece.

Notice anything unusual about TAPI's route? That it crosses not one, but two nations suffering from armed insurrection.

It's easy to see why Karzai is so enthusiastic about TAPI. First, it provides substance to Karzai's assertion that he is in fact more than the "Mayor of Kabul" and that his administration can provide security for the pipeline if built. On 12 December 2010 Afghanistan's Minister of Mines and Industries Wahidullah Shahrani declared that, "Afghanistan will deploy about 7,000 troops to secure a major transnational gas pipeline slated to run through some of the most dangerous parts of the war-torn country."

Never mind that TAPI is planned to pass through Herat, Helmand and Kandahar in Afghanistan, all sites of major Taliban activity. Letting reality intrude for a moment, assuming that the international community can be persuaded to underwrite the project, the prospect of building the TAPI pipeline under armed guard and subsequently defending from attacks for the period of its operational life is daunting, in terms of both manpower and cost.

A second incentive for Karzai to beat the drum for TAPI is - money, lots of it, in the form of transit fees. Afghanistan is currently almost entirely dependent on foreign aid, with approximately 90 percent of the national budget financed externally. According to the Ambassador of Afghanistan to Canada, Afghanistan's transit revenue from TAPI could amount to $300 million per year, representing about one-third of the government's domestic revenue ($887 million in 2008-2009) budgeted for development efforts.

And Turkmenistan's interest in TAPI is equally self-serving. For Berdymukhammedov, TAPI represents a triumph of diversifying his export options further away from Russia's state-owned natural gas monopoly Gazprom, which has played hardball tactics for years over pricing and volumes of Turkmen natural gas deliveries. While Turkmenistan exports small amounts of natural gas to Iran, its major export success up to now has been China.

On 14 December 2009 China and Turkmenistan formally opened the first section of a 1,139 mile-long, 40 bcm per year natural gas pipeline, financed by China National Petroleum Corporation (CNPC), China's largest oil and gas producer and supplier. The Turkmenistan-China pipeline has since been expanded to carry Uzbek and Kazakh natural gas, but given Turkmenistan's dolorous experience with Gazprom, Berdymukhammedov believes the more export options, the better, saying of TAPI, "The pipeline between Turkmenistan, Afghanistan, Pakistan and India will be a weighty contribution to positive cooperation on this continent."  

But before Karzai breaks out the champagne, he should that of Turkmenistan's four export routes: north to Russia, east to China, west to Europe and south to Pakistan, the routes to Russia and China are more lucrative with less risk and accordingly have a higher priority over a route through Afghanistan.

Karzai should also remember that Turkmenistan is concerned about pipeline security, so much so that on 19 December 2008 it co-sponsored a Resolution on Reliable Energy Transit (63/210) before the UN General Assembly, which subsequently passed. The Resolution recognized the need for international cooperation to ensure "the reliable transportation of energy to international markets through pipelines and other transportation systems." 

So, where does this leave TAPI? Karzai's interest is self-evident, but the position of Turkmenistan is more ambivalent, as it already can sell all the natural gas it exports, and is unlikely to risk its gas in such an unstable environment until the security issue is solved. And don't forget the situation along the Afghan-Pakistani frontier.

And then there's the little issue of financing.

So, while everyone agrees that TAPI would be a good idea, none of the four countries involved are stepping up to finance it, and security guarantees come from the weakest country of the quartet.

What is certain is that until the insurgencies in both Afghanistan and Pakistan are solved, such a pipeline would most certainly be a prime target for attack, which means that for the foreseeable future TAPI remains a hazardous and risky project for all but the most optimistic, naïve or foolhardy investors.

By. John C.K. Daly of Oilprice.com