Pakistan has been engaged in talks on the US-supported Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project dating post-9/11 subsequent to the successful US invasion of Afghanistan and the US-opposed Iran-Pakistan (IP) gas pipeline project conceived as early as in the mid-1950s - an opposition that may be withdrawn if the outcome of the ongoing talks between the West and Iran are successful and lead to the lifting of sanctions. Several agreements have been signed and yet neither of the two projects has moved beyond the drawing board. TAPI remains hostage to the ongoing civil war in Afghanistan and while there is evidence to suggest that Taliban terror activity in northern Afghanistan where the pipeline would be laid is almost non-existent yet the Northern warlords have been historically opposed to Pakistan for what is perceived as our policy vis-a-vis the Taliban.
Be that as it may, analysts maintain that antagonism against Pakistan may be over-ridden by the fact that the pipeline would be extremely lucrative for the Afghan government in not only providing the country with fuel but also in generating revenue through payment of transit fees by Pakistan. TAPI's feasibility study indicates that it is a win-win situation for all the participating countries with the energy surplus Turkmenistan supplying to the three energy deficient South Asian countries. Needless to add, Pakistan too would receive a transit fee from India if the project proceeds as planned. In this context, the recent signing of Transmission Advisory Service Agreement by the four countries leads one to conclude that the deal may go through and pave the way for the construction of 1680-kilometre-long pipeline. The cost of the gas would be around 13 dollars per mmbtu contrasting rather poorly with the cost of domestic gas at 3.5 dollars per mmbtu. Mobin Saulat, the Managing Director of Inter State Gas System informed Business Recorder that the 13 dollar per mmbtu TAPI price is acceptable with the Asian Development Bank charging 12,000 dollars per month from each of the four countries to act as transaction advisor with the terms of reference to identify a technically and financially sound company that could form a consortium to generate 7.8 billion dollars. Or in other words, finances would be made available through the consortium for the construction of the pipeline.
In marked contrast, sources in the Ministry of Petroleum and Natural Resources have indicated that the IP gas price of around 12 dollars per mmbtu, or 87 percent of the international price of crude, which is lower than the TAPI price, is not acceptable to Pakistan and accounts for the request to Iran to renegotiate the price. However, given the paucity of government finances, Pakistan has reportedly also requested the Iranian government to enhance the announced 500 million dollar loan for the construction of the pipeline on Pakistan's side of the border. Iran has reportedly agreed to renegotiate the gas price but has refused to enhance its support for the construction. There are concerns that if sanctions are lifted against Iran, a prospect that seems likely given recent statements by John Kerry that an agreement is close in spite of France's insistence that Iran should do more, Iran may opt to set up a plant that would allow it to convert gas to LNG and thereby generate greater revenue. Thus Pakistan's leverage would certainly suffer if sanctions against Iran are lifted and therefore there is a need to conclude the deal and begin implementation of the project as soon as possible.
The PPP-led coalition government had levied a Gas Infrastructure Development Cess for financing proposed imported fuel projects and on the date the government completed its term, around 50 billion rupees had been collected under this head. It is hoped that the amount is used to begin construction of the IP pipeline assuming that the consortium to be set up by ADB would take care of construction costs of TAPI. Pakistan's severe energy shortage, however, also requires internal reforms and it is hoped that transmission and distribution losses are brought down to international levels and the inter-circular debt be dealt with through disconnecting all those who do not clear their bills with government entities outstanding bills cut at source.
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