TAPI and IPI: socio-economic benefits of gas pipelines
By Mehmood-Ul-Hassan Khan

With the dawn of globalization, conflicts and confrontations have been replaced by the economic and political diplomacy. In the economic arena, energy seems to be centre point as more energy means more power industrial and political.  Hot pursuits of the energy resources have also been instrumental for peace building. It was most recently observed in the case of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) and also Iran-Pakistan-India gas (IPI) pipelines.

The TAP gas pipeline is based on mutual friendship, respect, and need. India has now decided to join this project TAP.  The project will also result in the economic prosperity, regional cooperation and above all smooth and easy availability of energy resources i.e. gas. The availability of gas (energy) will help economic growth, development and economically a stronger Pakistan, The middle beneficiary will be Afghanistan as it will be collecting transit fee estimated between $200m to $350m per year ? another economically sound point for all the parties concerned.

Recent development

Most recently a gas pipeline framework agreement (GPFA) has been signed to facilitate joining of India in TAP gas pipeline project, turning it into a 4-nation project. Thus the TAP has now become TAPI. It is economically and commercially viable project costing around $7 billion.

The steering committee agreed to a schedule to complete the project by 2010 and start of gas import from 2013. The pipeline would import 3.2 bcf gas from Turkmenistan which India and Pakistan will purchase on equal basis. Asian Development Bank (ADB) Country Director Peter Fedon facilitated the process and stressed the immediate start of the TAPI.

Assurance by Turkmenistan

In a recent meeting held in Islamabad, Turkmenistan confirmed adequate reserves of gas to support the combined demand of the buyer countries for 30 years. The three countries, Afghanistan, India, and Pakistan confirmed their demand for natural gas to be imported through TAPI for an unlimited period. 

Turkmenistan is one country where not only huge reserves exist but new large gas reserves have been discovered just recently. The government of Turkmenistan has awarded the contract for certification of reserves of various gas fields to a British firm making it more authentic and scientific for future buyers and other interested parties.

It is estimated that total gas reserves are eight trillion cubic meters (TCM) which would leave the Turkmen government with huge surplus reserves after meeting the demand of the TAPI buyers. Turkmenistan assured the meeting that audit report on certification of gas reserves will soon be available for the information of interested parties.

Afghanistan’s proposal

Afghanistan proposed to buy up to eight million cubic meters per day in years 1 and 2, and up to 14 million mmcfd the 90 mmcmd allocated to the project. Pakistan and India principally agreed to share the remaining volume between them on equal basis. All the four parties also have agreed to formulate a long-term pricing mechanism which will be attractive to the buyers as well as the seller and will reflect the new market trends as well as the long-term commitment of the parties to this project. The parties have agreed to form a consortium of investors to undertake the detailed feasibility study and further actions.

TAPI specifications

TAPI is a 1,680-km 56-inch diameter gas-pipeline starting from Dauletabad field in Turkmenistan to Fazilka at the Pakistan-India border, passing through Herat and Kandhar in Afghanistan and Multan in Pakistan. It is estimated that the pipeline will carry $3-5 trillion in oil and natural gas from the Caspian Sea basin via Turkmenistan, Afghanistan, and Pakistan. It will be profitable for investors. The project cost was initially estimated $3.3 billion in 2004 which has now been increased to $7.6 billion in 2008. The sharp increase in steel; construction compressor stations prices are the resultant. Despite high inflationary ratios the project is still considered as economically and financially viable. The Pakistan government has already awarded the contract for laying the TAP gas pipeline project to the US-based International Oil Company (IOC).

Collateral/integrated benefits 

The TAPI pipeline will be completed in 2010. Two oil refineries and four thermal powerhouses, with a 1,000MW capacity will also be constructed. Further, the pipelines would be constructed up to Gwadar and would supply two million barrels of oil and four billion cubic feet of natural gas to Pakistan per day. The pipeline will also be extended to the seaports in Pakistan for shipment of gas to other Asian markets.

Energy resources of Pakistan

In chilly winter season, households and industrialist are used to face shortage of gas supply. Life and machine both suffers immensely. The government is planning to import gas supply from different sources and the TAPI is one of them. Gas supply in Pakistan is currently 71m cubic meters per day, which is estimated to increase by 50 per cent in the next five years.

At the same time, gas production in Pakistan is expected to increase substantially. It is assumed that in the near future Pakistan will face a shortfall of 600 mmcfd of natural gas by the year 2009 despite recent gas discoveries, which would be insufficient to meet the rising demand. So, TAPI would be a viable alternative option to fulfil the rising demands in the days to come.

Paradigm-shift

TAPI and IPI gas pipelines have created a new paradigm of friendship which may put an end to some regional concerns and worries on the future relationship and political understanding between neighbouring countries. All said and done terrorism may be one of the main hurdles in the completion of TAPI and IPI gas pipelines onb schedule. 

Economic benefits

Economic benefits are the most potent factor of the whole project as it provides cheap energy (gas) for Pakistan, low transit fee, and access to energy markets in the Central Asia, which will add to the economic prosperity of all the involved countries. It is estimated that the TAPI project will reduce poverty by expanding the use of natural gas resources and enhancing sub regional economic cooperation among Turkmenistan, Afghanistan, Pakistan and India.

TAPI and IPI - benefits

It will generate hundred of thousands new jobs. It would be one of main instrument for enhancing regional stability and improving living standards in South and Central Asia. It will be a joint-giant effort in linking the energy-deficit economies of South Asia to the hydrocarbon-rich Central Asian countries. It will provide cheaper and environment-friendly energy to consumers. It will generate incomes/revenues that can be used for developing the social sectors especially schooling, medication, clean water and housing..

IPI gas pipeline

The hurdles in the way of the long awaited Iran-Pakistan-India gas pipeline have been cleared. The IPI gas pipeline ($ 7.4 billion) has been finalized during the recent visit of the Iranian President Mahmoud Ahmedinejad. In addition to it, Tehran would provide Pakistan 1100 MW of electricity per day which would be used to control the high ratios of energy shortage. It will bring economic prosperity to all the involved countries. Especially Pakistan can enhance its strategic and economic significance by permitting its territory to be used for the transit. Transit fees ranges from $400 million to $750 million a year and Pakistan may be able to earn, as much as $500 million a year if the proposed gas pipeline is to materialise. In fact, Pakistan stands to earn about $14 billion in 30 years, including $8 billion in transit fee, $1 billion in taxes and $5 billion in savings.

If all goes well, construction could start very soon and the pipeline, linking the world's second largest gas reserves to the fast growing South Asian economies, could be completed by 2012. It would initially transport 60 million cubic metres of gas (2.2 billion cubic feet) daily to Pakistan and India, half for each country, but capacity would be raised later to 150 million cubic metres. Talks on the 2,600-kilometre (1,615-mile) Iran-Pakistan-India pipeline began in 1994 but have been stalled by tensions between India and Pakistan and disagreements over transit fees.

Geo-political and geo-strategic implications 

The agreements also showed Pakistan's will to come out of the total subordination to the US. Pakistan needs to build peace with its neighbours to ensure a stable future for itself. The trilateral deal envisaging the supply of gas to China through Pakistan is also a good omen for regional cooperation that will work to everyoneÕs benefit. On the political front, the pumping of Iranian gas into Pakistan, India and China at a time when the US opposes such dealings with IranÕs Islamic regime is significant.

It shows the revival of regionalism against the onslaught of brutal globalization. It reflects the demise of uni-polarity arena.  It also shows the defiance of US imperialisms drive.

Through IPI gas pipeline project it is hoped that Pakistan would be successfully normalize their relations with Iran and India. It is estimated that energy diplomacy may also bring meaningful change in IndiaÕs foreign policy and ongoing CBMs. The completion of these projects will open the door for the energy wealth of the region-coal in India, gas in Pakistan and Bangladesh, hydropower in Nepal and Bhuta and renewable energies in Sri Lanka and Maldives that need to be pooled and used in many ways that are more conducive to the prosperity of the people than their exploitation separately.

Concluding remarks

The TAPI and IPI gas pipelines projects would boast the regional economies and open up unlimited doors of economic opportunities. It would be win-win situation for all the countries. Energy resources has become precious commodity and persistent high prices of oil and gas in the international markets has forced the regional countries to say no to politics of confrontation, conflict and cheat and start new era of economic prosperity, trust, cooperation and above all a sense of true cooperation for the benefit of all the peoples in the region.