Turkmenistan has agreed to supply gas on the delivery point at Afghanistan-Turkmenistan border at 55 percent of Brent oil parity. According to official documents available with Business Recorder, Pakistan and Turkmenistan held several rounds of bilateral negotiations on settling TAPI gas price.
The final round of bilateral gas price negotiations with Turkmenistan was held in Islamabad on October 25-26, 2011. It was chaired by Dr Asim Hussain, Minister for Petroleum and Natural Resources. Pakistan side, in light of recommendations of international consultants, negotiated a base price, contract price formula and price review. After prolonged negotiations both sides agreed to the following: Base Price (Po) which comes to about 55 percent of Brent oil parity at the Turkmenistan-Afghanistan border (delivery point).
The steering committee (SC) of the Cabinet on imported gas pipeline projects, after detailed deliberation on the matter, endorsed the gas price formula and gas price agreed with Turkmen side. The SC further authorised Petroleum Ministry to negotiate and finalise Gas Price Review clause as deemed appropriate.
SC recommended that ECC should approve the draft Gas Sales Purchase Agreement (GSPA) along with TAPI gas price and gas price formula for execution by Inter-State Gas Systems (Pvt) Ltd (ISGS) with Turkmengaz. Contract price formula comprises of a basket of fuels which include high sulphur fuel oil (HSFO) 380 centistokes (cst), HSFO 180 cst and Gasoil 0.5 sulphur, prices based on Singapore quotation of Platts oil gram.
To share the risk of transportation tariff and transit variability through Afghan territory, both sides also agreed a risk-sharing formula and agreed to review gas price after 5 years - a matter under discussion for some time. Pakistan and Turkmen position over the gas price review would be linked with significant and material change in Regional Energy Market (Turkmenistan, Pakistan, India, China and Iran). The MD of ISGS briefed the meeting that since mid-2010 the momentum on TAPI project negotiations picked up and in December 2010 Inter Governmental Agreement (IGA), Gas Pipeline Framework Agreement (GPFA) and Heads of Agreement (HOA) for TAPI GSPA were signed in Turkmenistan.
TAPI participating countries also held a number of extensive rounds of negotiations and Pakistan-Turkmenistan GSPA is ready for signing. The matter was placed before ECC on November 13, 2011 for policy guidelines and in pursuance of ECC decision. On November 14, 2011 on the occasion of Turkmen President's visit to Islamabad, Chairman Turkmen-gas and MD of ISGS signed a Joint Declaration for signing of the GSPA, subject to respective approvals.