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TAPI- Regaining focus

Courtesy: Tariq Osman Hyder

Prime Minister Nawaz Sharif will visit Turkmenistan and Kyrgyzstan from 20 to 22 May. Regional energy connectivity lies at the heart of Pakistan’s strategic interests in Central Asia; particularly with Turkmenistan, our oldest and closest partner in this region. This is an opportunity to restore focus to the 1680 km natural gas pipeline project from Turkmenistan. The Prime Minister is well qualified to appreciate that two decades have been lost, as he has been to Ashgabat and other Central Asian capitals more frequently than any other Pakistani leader. He visited Ashgabat in: May 1992 for the first Summit Meeting of Central Asian States, Pakistan, Turkey, and Iran; May 1997 for the ECO Extraordinary Summit after which he and President Niyazov signed a Protocol on the gas pipeline project with Unocal and Delta oil companies of the CENTGAS Consortium; and a one day visit in October 1997 to enquire after President Niyazov’s health following a major operation, during which meeting the pipeline project was further discussed.

In fact, since 1993, as I worked on and witnessed during my five years as our first Ambassador to Ashgabat, energy supply was the major agenda item, followed by Afghanistan dominating all high level visits. During the visit of Prime Minister Benazir Bhutto on 26-28 October 1994, the return visit of President Niyazov on 13-15 March 1995, and President Leghari’s two visits on 6-8 September 1995 and 14-15 May 1996.
To finally implement this project there are two overarching requirements. First of all for the major actors to focus their attention and efforts now, rather than waiting for things to fall into place before getting into high gear, otherwise nothing gets done, as has been the case till now. Secondly heeding George Santayana’s dictum that, “Those who do not remember the past are condemned to repeat it.” That requires studying the developments and dynamics of what went before.
That is not easy as most government institutions are preoccupied by day to day firefighting rather than refreshing institutional memory. Similarly the IFIs preoccupied with development issues, have limited time for past processes predating their own involvement.
Right now the attitude of the United States appears the most disappointing. It has a vital stake in Afghanistan’s future as it withdraws, in Pakistan as well, and in regional connectivity linking India. Hence actively supporting TAPI which would: generate significant construction and security jobs as well as a transit income for Afghanistan; and contribute to addressing Pakistan’s critical energy shortages; while providing needed energy to India, should shape American policy. Rather there is skepticism whether Turkmenistan, after fulfilling existing commitments, has sufficient reserves to service TAPI with 3.2 billion cubic feet per day of natural gas. Also doubts that Turkmenistan can reach an agreement with any major oil and gas company, such as Total, now that other aspirants such as Chevron have left. An assumption that Turkmenistan is constitutionally unable or unwilling to provide dedicated fields, development, production, and revenue sharing concessions to foreign companies, preferring instead service contacts and gas purchase agreements.
Beneath this caution lies an implicit question as to Turkmenistan’s level of interest in a pipeline to South Asia, and its ability to satisfy any of the oil majors companies which would want an agreement justifying major investment. But is the past any guide?
In 1993 Turkmenistan, Afghanistan, and Pakistan agreed to work towards enhancing trade connectivity through gas supplies, electricity transmission, road and rail links. At the end of that year when I arrived in Ashgabat it was as clear then as now that gas and oil pipelines required commercial investment from a company with expertise and a stake in Turkmenistan. I found a willing project partner in the Argentinian company Bridas, headed by Carlos Bulgheroni, which was pumping 16,500 barrels of oil a day just off the Caspian, and had as its concession a major gas field at Yeslar, near the large Daulatabad gas field and only 150 km from the Afghan border. For Bridas a gas pipeline to Pakistan made eminent sense as it could then tap and feed in its gas field as well.
In 15 March 1995 President Niyazov and Prime Minister Benazir Bhutto signed an MOU in Islamabad on supplying Turkmen natural gas to Pakistan, with Bridas’s involvement and to examine the feasibility of an oil pipeline. On 14 May 1996, by which time Unocal had replaced Bridas, in Ashgabat the heads of state of Turkmenistan, Afghanistan, Pakistan, and Uzbekistan signed an MOU for a natural gas pipeline to which Uzbekistan would also contribute, and expressing interest in a parallel oil pipeline to Gwadar. On the same day Turkmenistan, Afghanistan, and Pakistan signed a separate trilateral agreement for an oil pipeline taking into account Russian, Kazakh and Uzbek reserves, and the availability of the existing Pavlodar-Chimkent-Charjev oil pipeline. The projected capacity was 750,000 barrels a day.
Unocal’s involvement in the gas pipeline project rested on an understanding with Turkmenistan which foresaw dedicated reserves, participation in development, and sharing of revenues. On 23 July 1997 in Islamabad the two countries signed with Unocal a Joint Agreement to fix the gas purchase price between a range of $1.60 and $2.00 per MMBTU indexed on 70% HSFO C&F Karachi.
Turkmenistan has shown flexibility in the past, and more recently with China which built a 7000 km pipeline while skeptics here and elsewhere argued that there were insufficient Turkmen gas reserves.
What needs to be done now? All the major parties have to step up their game. Pakistan’s Foreign Office should coordinate more closely with our Inter State Gas Systems (and revive its representation on its Board which I had earlier ensured), and with the Petroleum Ministry. The United States should not put all its eggs into the World Bank led CASA-1000 project for 1100 MW electricity from Kyrgyzstan and Tajikstan, itself harking back to the bilateral 1992 agreement to export Tajik hydel power to Pakistan. If $368.25 million from IDA and $250 million from the IDB can partially fund CASA, why not similar amounts for TAPI to attract investment capital? The ADB which revived this project and understandably is now TAPI’s Transaction Advisor, should take a leaf from the World Bank which for its energy and other regional connectivity projects brings on board relevant negotiating expertise in addition to legal and technical capacity.
Most important, Turkmenistan has to again show flexibility. My Turkmen friends tell me that realizing the need for a major oil and gas company to bring in technology, experience, investment and to mediate impartially between all the four countries, Turkmenistan is ready to work with and to satisfy a Consortium Leader, probably Total, which should be selected by September this year. Encouraging Turkmenistan and Pakistan to fast track TAPI should be the major objective of this visit.

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