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Progress in TAPI natural gas pipeline transit fees

Energy Global,

Turkmen officials have said they hope for a conclusion to the long-awaited gas price deal with Pakistan and India regarding the construction of TAPI – an ambitious project to build a pipeline through Afghanistan.

Holding more than 4% of the world’s natural gas reserves, Turkmenistan expects to host a new round of talks with participants in the US-backed pipeline project within the next few months, according to sources.

The news comes as Indian Prime Minister Manmohan Singh, recently hailed “great progress” since the signing of a preliminary agreement in December 2010.

The proposed 1700 km (1056 miles) pipeline was first envisaged in the mid 1990s but construction has yet to begin. Once completed, it could carry 33 billion m3/ yr, equating to around 1 trillion m3 of gas over a 30 year period.

However, the pipeline’s route, particularly the 735 km (450 miles) sections through Afghanistan, presents significant security challenges and requires the participating countries to agree on volumes and price, as well as securing funding for the project.

The TAPI countries’ preliminary agreement contained no specific provisions for security, finance, volumes or price. In addition, Turkmenistan’s unflinching policy of selling gas at its own borders means that Pakistan and India would need to agree on transit fees with each other and with Afghanistan.

“According to the preliminary agreement, discussions between the participating countries should take place before summer,” an anonymous government source told the media. “Possibly, this could include the signing of a gas sales purchase agreement.”

Turkmenistan’s natural gas reserves are believed to be equal to those of Saudi Arabia and behind only Russia, Iran and Qatar. Supporting TAPI is a way for the Central Asian state to diversify sales from Russia. The pipeline is designed to supply natural gas from the country’s South Iolotan field, which has been labelled the world’s second-largest field by British auditor Gaffney, Cline & Associates.

Recent reports from India say the country has almost finalised the transit fee with Afghanistan and Pakistan.

“A broad understanding among India, Pakistan and Afghanistan has been arrived on transit fee for import of natural gas through Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project,” Minister of State for Petroleum and Natural Gas R.P.N. Singh told the media. “However, a formal agreement has not been signed yet,” he added.

Singh said India and Turkmenistan have already agreed on the price mechanism for the estimated US$ 7.6 billion, 1735 km long pipeline. However, Singh noted that “gas sale and purchase agreement” relating to the TAPI pipeline project, which includes inter alia the pricing of Turkmen gas, has not been signed yet.

Edited from various sources by Cecilia Rehn.

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