There are signs that restrictions in Turkmenistan on foreign ownership of oil and gas fields could be at least partially lifted in order to pave the way for international oil companies to join the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline project.
There is a high level of political support for TAPI, which will deliver Turkmen gas to the energy-hungry markets of south Asia. However, access to Turkmenistan’s oil and gas reserves, together with security concerns in Afghanistan, have held back the project’s launch.
The planned 1,735-km TAPI pipeline will run from Turkmenistan’s Caspian oilfields via Afghanistan and Pakistan to India. The U.S. and the Asian Development Bank firmly back the project, saying it will contribute substantially to regional development. However, no major oil company has yet signed up.
The main obstacle for potential private sector participants is Turkmen legislation preventing foreign companies from taking stakes in its oil and gas fields. This has held back foreign investment in the energy sector, despite it having the world’s fourth-largest gas reserves, according to a 2008 audit by consultants Gaffney, Cline & Associates.
The other big stumbling block is the question of securing the Afghan section of the pipeline, and the uncertainty surrounding Afghanistan’s future following the withdrawal of international forces in 2014. Security needs are likely to push the costs up further, with estimates of the project costs ranging from $7.5 billion to $12 billion.
Afghanistan is not the only security issue either. Although India and Pakistan are participating in the project, the two countries remain at loggerheads over the region of Kashmir. In August, Pakistan boycotted the latest round of talks on TAPI after an increase in tensions over ceasefire violations in the disputed territory.
However, the growing need for energy in both countries has forced them to work alongside each other on the project. All four of the participating countries are keen to accelerate TAPI and – with no clear idea of if or when construction work will begin – have already signed purchase agreements for future deliveries of Turkmen gas. In July, ministers from the four countries also signed a protocol agreeing to set up a Dubai-based special purpose vehicle – the TAPI Ltd consortium – that will include selecting a company to manage the project.
India is expected to account for a substantial share in the increase in global energy demand, which is forecast to rise by one-third by 2035. India is set to become the largest single source of global oil demand growth after 2020. Demand is expected to increase by 5.4% a year between 2007 and 2030.
Bangladesh has also indicated an interest in joining TAPI. It has a shortfall of 500 MMcf/d. Extending TAPI to include Bangladesh would add 2,000 km to the already ambitious project.
From the Turkmen side, TAPI will help it diversify its gas export markets away from Russia. China is the primary interest as Turkmenistan has become China’s top gas supplier, and the two countries are also keen to push ahead with expansion of the Central Asia-China gas pipeline. However, Turkmenistan is also mulling construction of a pipeline to Baku, under the Caspian Sea, which would allow the export of gas to Europe, bypassing Russia, as well as the southern TAPI route.