With Islamabad vying for price cut, the energy ministers of Pakistan and Turkmenistan met on Monday for discussions on two major energy import projects, including the way forward on execution of multi-billion dollar Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project.
Pakistan had already taken up with Turkmenistan the issue of gas price review and delivery point of gas under TAPI pipeline project in previous meetings. In the existing gas sales purchase agreement under TAPI, the gas delivery point is Afghanistan-Turkmenistan border but given the Afghan situation, Pakistan wanted a gas delivery point at the Pakistan-Afghan border.
The ministers agreed to start formal discussions on two projects — TAPI and the possibility of a power transmission line between the two countries — on Tuesday at the technical level. “It was decided that a meeting of the technical working group on TAPI will be held on Tuesday (today) to propose the future roadmap given the changed dynamics of the project,” an official statement said.
Pakistan’s dependence on imported fuel has been increasing over time as domestic gas resources fall by as much as nine per cent per annum in recent years and the share of LNG has gone up. At present, there are two government-guaranteed LNG terminals with 1.2 billion cubic feet per day (bcfd) LNG handling capacity while two more LNG terminals in the private sector with 1.2bcfd handling capacity are in pipeline.
At present, the share of LNG is 24pc in the national gas grid of Pakistan. After operationalisation of two more LNG terminals, its share will be up to 48pc. Qatar has captured the Pakistani LNG market and has been looking for increasing its share including through joint venture partnership with an upcoming private sector LNG terminal.
During recent months, Pakistan had faced a gas crisis due to higher reliance on LNG imports, mostly from the spot market as long term spot market players, except Qatar, continuously defaulted on their commitments. Now, Pakistan wants to diversify gas import sources including through the TAPI pipeline.
This situation also calls for revising gas prices under the TAPI project by Turkmenistan. Pakistani authorities had two years ago called for the price opener as they believed existing prices under TAPI would be reasonably (5-10pc) higher than LNG being imported from Qatar and other countries. The 1820-km pipeline — worth around $8bn — had envisaged originally about 1.3 bcfd each to Pakistan and India.
The LNG mechanism provided flexibility to the purchaser in terms of gas quantities and tenure of supplies while gas pipelines once constructed could not be abandoned or changed and hence involved long term liabilities going beyond 15-20 years. Therefore, unless piped gas was significantly cheaper than shipped LNG, there was no incentive for Pakistan to pursue it. Turkmenistan has already started physical work on the pipeline in its territory.
In response, Turkmenistan had agreed to discuss the issue. The pipeline project had a two-phased construction plan by Turkmenistan which held about 85pc stakes in the joint Tapi Pipeline Company with 5pc shareholding each from Pakistan, Afghanistan and India.
An official statement said a high-level delegation of Turkmenistan led by Deputy Foreign Minister Vepa Hajiyev held extensive meeting with the Pakistani delegation led by federal Minister for Energy Hammad Azhar. Both sides discussed various aspects of the flagship TAPI gas pipeline as well as the Turkmenistan-Afghanistan-Pakistan power transmission line.