In a major leap forward, Pakistan and Turkmenistan on Monday signed the Gas Sale Purchase Agreement (GSPA) for the proposed $7.6 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline that will pave the way for the supply of 3.2 billion cubic feet of natural gas per day (bcfd) from the South Yolotan/Osman and adjacent gas fields to south Asian states.
Both countries have agreed on the gas sale price of $360 million cubic meter (mcm) at the Turkmenistan-Afghanistan border after deduction of $29 mcm as transit and transportation cost through Afghanistan. The cost will be $10.28 mmBTU. The base price comes to 70 percent of Brent oil parity in the mid country delivery point of Multan. The contract price formula comprises basket fuels of HSFO 380 centistokes (cst), HSFO 180 cst and Gasoil 0.5 sulphur, is based on prices of Singapore quotation of Platts oil gram. To share the risk of transportation and transit variability through Afghan territory, both countries agreed to a risk-sharing formula. The agreement also contains clause for gas price review after five years.
Prime Minister Yousaf Raza Gilani and Turkmen President Gurbanguly Berdimuhammadov witnessed the signing of the agreement on GSPA relating to TAPI gas pipeline by the Managing Director of Inter-State Gas System Mubeen Saulat and Chairman of Turkmenistan Gas Trade Concern Amanali Hanalyev. An official source said the price of gas had remained the major outstanding issue. Pakistan wanted the buyers to negotiate price jointly with the seller, but Afghanistan and India negotiated a price on bilateral basis with Turkmenistan. The base price number agreed by the countries would be tendered at the final signing of GSPA by the four participating countries, which is expected to be signed in the next few weeks in Ashgabat. The process for hiring transaction adviser is expected to be completed by December 2011. The project will take between four to five years to complete after signing of all the contracts.
Initial feasibility study of the project was conducted in 2004. The momentum on TAPI project negotiations picked up after mid 2010 and in December 2010 Inter Governmental Agreement (IGA), Gas Pipeline Framework Agreement (GPFA) and Heads of Agreement (HOA) were signed in Turkmenistan. Several rounds of bilateral negotiations were held between Turkmenistan and Pakistan on TAPI gas price ending in October, 2011.
The TAPI pipeline will cover 1,680kms from Turkmenistan through Herat and Kandahar in Afghanistan, cross the Pakistani border near Chaman to pass near Zhob, DG Khan, Multan, and onwards to Fazilka near Pak-India border. The Asian Development Bank (ADB) is acting as the facilitator and coordinator for the project and had funded the feasibility study of the project.
Both countries also signed accords to enhance bilateral cooperation in trade, energy, media and culture.
Foreign Minister Hina Rabbani Khar and Turkmen Minister Rashid Meredov signed an MoU on cooperation between the foreign ministries of the two countries. Hina and Turkmen Culture Minister Gulmurad Muradov signed a MoU on cultural cooperation. Minister for Information Dr Firdous Ashiq Awan and Turkmen Minister for Culture Gulmurad Muradov inked an agreement on cooperation between the Associated Press of Pakistan (APP) and Turkmen News State Service, while and MoU on cooperation between Pakistan’s Ministry of Commerce and Ministry of Trade and Foreign Economic Relations of Turkmenistan was signed by Federal Minister for Commerce Makhdoom Amin Fahim and Turkmen Minister Byar Abayev.
MEETING WITH ZARDARI: During his meeting with the Turkmen president, President Asif Ali Zardari said Turkmenistan had the capacity to meet Pakistan’s growing energy requirements, whereas they could provide trade corridor to Turkmenistan, over both land and sea.
He called for an early realisation of the TAPI project, as it had the potential to spur growth and transform the region’s economic landscape. He proposed that the two countries enter into a currency swap agreement, preferential tariff arrangement and a free trade agreement to enhance bilateral trade and investment ties.
Zardari urged for establishing rail and air links between Pakistan and Turkmenistan to the mutual benefit of the two countries. He called upon the business communities, trade facilitation bodies and chambers of commerce and industries of the two countries to establish and advance communications to further enhance bilateral trade.
MEETING WITH GILANI: During the Turkmen president’s meeting with Prime Minister Gilani, both leaders agreed to strengthen bilateral relations through increased cooperation in diverse fields. They emphasised that the joint ministerial commission (JMC) should hold regular meetings to explore the avenues of enhancing cooperation in the fields of energy, trade, science and technology, railways, exchange of parliamentary delegations, cultural exchanges and people-to-people contacts.
The prime minister offered Turkmenistan corridor over land and sea routes.
He said the Pakistani senior minister would visit Turkmenistan to discuss export and manufacturing of cement in Turkmenistan. He said Pakistan wanted to import 1,000MW of electricity from Turkmenistan.
The Turkmen president said his country was ready to export electricity to Pakistan and also gas from newly-discovered gas fields.
