According to a senior Asian Development Bank's energy specialist, Dan Millison, reserves information from Turkmenistan released some time ago shows a lower than expected gas deliverability for a proposed $3.3-billion TAP (Turkmenistan- Afghanistan--Pakistan) pipeline project to carry gas from Turkmenistan via Afghanistan to India and Pakistan.
It may be remembered that ADB has been brokering the 1700 km pipeline project since 2002, promoting it as a win-win example of regional co-operation, a pioneering effort to link gas-rich Central Asia with energy-deficient South Asia through Afghanistan.
"The reserves information shows that Turkmenistan could supply enough gas for the first few years but then production is predicted to decline instead of increasing", said Millison. "They will need to find gas from other fields to meet pipeline design targets," he said.
ADB also pointed out that with long-term gas demand from India and Pakistan estimated at 50 BCM a year, there is a need for more than one pipeline. India already imports gas and the demand is expected to soar in the next decade, Pakistan, with its own reserves declining, is expected to begin importing gas after late 2008.
Apart from financing the feasibility report for the Turkmen project, ADB financed a study for underground natural gas storage in Pakistan, where storage capacity would help meet local demand peaks in winter and counter possible supply disruptions.
Earlier in its study issued in July 2005, ADB discussed that pipeline route would run from Daulatabad in Turkmenistan to Kandahar in Afghanistan to Loralai in Pakistan and then on to Multan. Although the route was not finalised because it is up to the investors to decide the route. Unfortunately, security concerns extend beyond Afghanistan.
If the route through western Afghanistan emerges as the best option, the pipeline would cross Balochistan where attacks on oil and gas transmission lines are a common feature.
If the alternative option is chosen, the pipeline would cross the North West Frontier Province (NWFP) of Pakistan, which includes the semi-autonomous tribal areas. These regions, most notably the tribal areas, are known for their fierce independence.
However, the Pakistan official said that in case of sanctions against Iran for its nuclear plan, Pakistan will immediately move towards the other proposed TAP pipeline and Qatar-Pakistan pipeline. When asked as to which project Pakistan would like to initiate in case of sanctions against Iran, Secretary Petroleum and Natural Resources Ahmad Waqar said that Qatar pipeline is costly and Turkmenistan has so far failed to provide certificate about Daulatabad gas field.
The construction of a natural gas export route from Turkmenistan to Pakistan, Russia, Kazakhstan, and Uzbekistan could eventually link in to the eastern gas line. The potential for demand growth in the Asian market is nearly unlimited at prices that both buyers can pay and suppliers can profit. This is in sharp contrast to routes to Europe where the regional producers would likely find intense competition among themselves for a limited market.
Russia, Turkmenistan, Kazakhstan and Uzbekistan have all publicly noted their interest in working jointly toward an eastern corridor. In the first stage of development, Turkmenistan is likely to provide most or all of the gas, with incremental supplies coming later from other countries. Since Pakistan and India's demand for gas has nearly no ceiling - at prices around of $2 per mmBtu - several suppliers could be considered once Turkmenistan gets the export ball rolling. However, there's no guarantee that Turkmenistan will not try to go it alone, leaving other suppliers with only small regional markets to tap.
Blessed with vast gas reserves, Turkmenistan has been exploring for the last 13 years ways to diversity its gas-export options and to lessen its dependency on the northern export route through Russia.
Turkmenistan's gas balance is such that its maximum possible production volume in the years ahead is estimated at approximately 100 billion-110 billion cubic meters per year. Domestic demand totals 15 billion-20 billion cubic meters, the maximum export volume to Iran is 10 billion-13 billion cubic meters, and the remainder is now contracted wholly to Russia.
The project would bring clean fuel at competitive costs to India and Pakistan coupled with the much-needed transit fees to Afghanistan and new markets for Turkmenistan. Turkmenistan's Daulatabad gas field has gross reserves of 1.4 trillion cubic metres. However, production forecasts are lower than expected, causing analysts to doubt that it could meet the proposed target of piping 30 billion cubic metres (BCM) of gas annually to South Asia.
This 2,700 km pipeline would cost more than double the Turkmenistan scheme but leaves out Afghanistan, where security concerns remain.
As regard with the financing of the TAP project, there was a proposal to establish a consortium with the participation of the multilateral agencies. Leading US companies like UNICOL formed a consortium including Delta of Saudi Arabia Itochu of Japan, Inpex of Japan, Hyundai of South Korea and Crescent of Pakistan. Recently, the Russian gas giant Gazprom was also keen to join in. Reports emanating from press indicating the interest of Chinese company named China Petroleum Engineering and Construction (CPECC).
It is said that Turkmenistan's gas reserves may be the greatest of the untapped oil and gas reserves in the Caspian region. What differs Turkmenistan from all other gas producers in the region is that it has a significant track record as a proven exporter of gas prior to the break-up of the Soviet Union and in recent years to Ukraine. Granted this export route, Russia has been closed off indefinitely, if not in perpetuity, by Gazprom, who has said on numerous occasions that the days of Turkmen gas transiting through the Russian system are over.
But it does leave Turkmenistan with a significant amount of domestic infrastructure to take gas to its borders. Given the transportation difficulties encountered by many aspiring gas and oil exporters in this part of the world, this fact is not insignificant.
Turkmenistan is largely a desert country, with proven recoverable natural gas reserves of 71 trillion cubic feet (TCF) (about two trillion cubic metres) and possible reserves of over 200 TCF (about six trillion cubic metres). It is one of the world's largest gas exporters. However, although its 4.5 million people receive free gas, electricity and water, incomes are among the lowest in Central Asia and health and education services are declining. With large gas reserves and a small population, Turkmenistan's export potential is huge, though substantial investments are needed to increase production.
Turkmenistan at present pipes most of its gas to Ukraine and Europe via Gazprom, the Russian utility, though it has also a small pipeline to Iran. Even if Turkmenistan settles for current gas prices with India and Pakistan, observers note that it should have some pricing leverage within five years when the project comes on stream.
The question is whether Pakistan will choose TAP with so many questions surrounding the availability of sufficient gas reserves for the pipeline in Turkmenistan.
The idea of the Trans-Afghan Pipeline was revived by the exhausting efforts of the Asian Development Bank after the defeat of the Taleban regime, but unrest in Afghanistan, the unpredictable behaviour of the Turkmen president, and Russia's total control over the Turkmen gas market render the idea quite unrealistic.
ADB's recent report again creates doubts in the minds of many. The question is why Pakistan can't consider seeking new avenues for importing gas from Kazakhstan which has proven natural gas reserves of 65 trillion cubic feet (tcf). Besides that, Uzbekistan and Azerbaijan has 66 and 30 tcf respectively of proven natural gas reservoirs.
With its 65 tcf of gas reserves, Kazakhstan certainly has the reserves to be a major gas exporter. More than 40% of the country's reserves are located in the giant Karachaganak field in the north-west. Karachaganak's gas processing is done north of the border at Russia's Orenburg facility, it is Karachaganak's potential of producing 200,000 b/d of oil and condensate that has investors interested in the field.
Currently Kazakhstan produces around 600-mmcf/d and imports another 450-mmcf/d, with no exports in the formula. Imports come into Almaty via Tashkent from eastern Turkmenistan, Kazakhstan has two separate pipeline grids; one that exports Karachaganak gas to Russia and one that import Turkmen gas for use in Almaty.
Azerbaijan could play an important role in Caspian gas exports as a key transit point to Turkey. The US Department of State has been pushing the idea that a gas pipeline from Turkmenistan across the Caspian and through Azerbaijan and Armenia and/or Georgia is a viable alternative to the northern Iranian pipeline. Under the scheme, both Azerbaijan and Turkmenistan would sell their gas along the route. The question of political obstacles to such a route remains a serious problem.
Uzbekistan is one of the 10 largest gas producers in the world. Since the fall of the Soviet Union, the country has made considerable headway in building its gas production from 4.1-bcf/d, in 1992 to almost 5-bcf/d in 1997. Taking short-term steps to increase production at existing fields, most gas production increases have come from fields in south-east Uzbekistan in older fields such as Shurtan and Kokdumalak, programs include conversion of cars and trucks to run on compressed gas instead of gasoline, and utilisation of gas for feedstock at a new $1 billion gas chemicals plant at the Shurtan gas field.