TAPI gas pipeline transit fee finalised, says India

ASHGABAT - Turkmenistan hopes to conclude a long-awaited gas price deal with Pakistan and India during imminent talks on construction of an ambitious project to build a pipeline through Afghanistan, a government official said on Thursday.
Turkmenistan, which holds more than 4 percent of the world’s natural gas reserves, expects within the next few months to host a new round of talks with participants in the US-backed TAPI project to link Turkmen gas fields with India, the source said.
His comments followed a letter from Indian Prime Minister Manmohan Singh, published by several state-run national newspapers on Thursday, hailing “great progress” since the signing of a preliminary agreement in December 2010.
The idea of the TAPI pipeline, an acronym formed from the initials of the four countries through which it would pass, was first raised in the mid-1990s but construction has yet to begin. The proposed 1,700-km (1,056-mile) pipeline could carry 1 trillion cubic metres of gas over a 30-year period, or 33 billion cubic metres a year.
But the route, particularly the 735-km (450-mile) Afghan leg, presents significant security challenges and will require Pakistan and India to agree on volumes and price. Participants must also secure funding for the project.
The preliminary agreement signed by the TAPI countries contained no specific provisions for security, finance, volumes or price. Turkmenistan’s unflinching policy of selling gas at its own borders means Pakistan and India would need to settle transit fees with each other and Afghanistan.
“According to the preliminary agreement, discussions between the participating countries should take place before summer,” the government source told Reuters, on condition of anonymity. “Possibly, this could include the signing of a gas sales purchase agreement.”
BP data show Turkmenistan’s natural gas reserves equal to those of Saudi Arabia and behind only Russia, Iran and Qatar. The Central Asian state supports the pipeline as part of its plans to diversify sales from Soviet-era master Russia.
It aims to supply natural gas from its Galkynysh field, better known by its previous name, South Iolotan, to Pakistan and India. British auditor Gaffney, Cline & Associates has said the gas field is the world’s second-largest. Agencies add from New Delhi: India said Thursday it has almost finalised the transit fee with Afghanistan and Pakistan for import of gas from Turkmenistan through a pipeline that will pass through these two countries.
“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 said while replying to a question in the Lok Sabha. “However, a formal agreement has not been signed yet,” he added.
The proposed 1,735-km long pipeline is estimated to cost almost $7.6 billion. On pricing of gas, Singh said India and Turkmenistan have already agreed on the price mechanism.
The contract price of TAPI gas is linked to a formula which contains indices based on fuel basket and other indices which are not as volatile as crude oil. The formula is similar to the ones used in international contracts. However, Singh said “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.

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