Pakistan, Turkmenistan agree on $10 per mmBTU for TAPI gas project

Pakistan has managed to persuade Turkmenistan to agree to a price of $10 per mmBTU for the supply of gas at 1.3 billion cubic feet per day (bcfd) under the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, which is significantly less than over $13 per mmBTU price agreed for the Iran-Pakistan (IP) gas pipeline.
An official source said the four participating countries of TAPI pipeline were likely to sign the gas sale purchase agreement (GSPA) in November in Ashgabat. Initially, Pakistan proposed that the three gas importing countries should jointly negotiate the price with the gas exporter, but India slipped by individually finalising gas price with Turkmenistan. The Pakistani team, led by Petroleum Minister Dr Asim Hussain, recently settled the price with Turkmenistan Deputy Minister for Energy Yarmuhammet Orazgulyev in Islamabad.
The pipeline is expected to start gas supply by December 2016, but that depends upon credible security cover to be provided by Afghanistan, which will also be receiving 500 mmcfd of gas, out of total envisaged supplies of 3.2 bcfd. Even after signing of the GSPA, the importing countries will have to negotiate individually the transit fee for the gas pipeline. Pakistan will be negotiating with Afghanistan and India to give and collect transit fees, respectively.
“The transit fee negotiations will centre on the two international practices of either length of the pipeline or quantity of the gas supplies,” the source said, adding that “these will take at least three or more months for conclusion”. Under the agreement, the member countries cannot disclose the negotiated price until the final GSPA is signed, as otherwise there would be pressure on Ashgabat to fix prices on the lower slab concluded with any participating country.
The leakage of settled price with Pakistan could have troubles for Kabul and New Delhi. On renegotiating of price tag for gas pipeline with Iran, the source said, “It is not on the cards immediately, but is possible later as GSPA contains a clause for re-negotiating of gas prices after three years of signing of the agreement.” The nominated commercial entities of Pakistan and Iran had signed GSPA on June 5, 2009.
The price of Iranian gas is over $13 mmBTU, which Pakistan tried hard to lower, but Iranians said it was not possible without including another country, India or China, in the project. “If any of these countries joins the project, the price could be lowered as it would be then economically feasible”, he added. Since Tehran had concerns over the seriousness of Islamabad over the IP project due to US pressure, it sought performance guarantee to ensure that it received penalties in case Pakistan failed to receive gas supply on its border by December 31, 2014.
To address the concerns of Iran, Pakistan issued a performance guarantee on May 28, 2010. An amount of $ 1.2 billion is required to lay the gas pipeline infrastructure to receive gas supplies from Iran at the border.