TAPI: A NEW PIPE DREAM

1
TAPI A NEW PIPE DREAM?

• The Pipeline Race to India and Pakistan
• The Middle East Institute, Columbia University
• Dr. Bhamy V. Shenoy
• Senior Advisor, Center for Energy Economics, UT
• bhamysuman_at_hotmail.com

2
TAPI A NEW PIPE DREAM?

• India needs gas. So far no success in securing
  gas through international gas pipelines.
  
• Turkmenistans gas reserve position seems to have
  improved in recent years.
  
• Relation between India and Pakistan has improved
  recently.
  
• But political situation while improving in
  Afghanistan, has deteriorated in Pakistan. A
  recent News week report called Pakistan the Most
  Dangerous Nation in World.
• What can India do? What can Turkmenistan do? What
  can US, and EU and other players in New Gas Great
  Game can do?
  

3
TAPI A NEW PIPE DREAM?

• Every pipeline project to secure access to
  Turkmen gas has been proposed earlier, and some
  of them by different groups.
  
• They all failed for various reasons.
• What has changed now to give hopes?

4
TAPI A NEW PIPE DREAM?

• During After
• Turkmenbashi rule
• Oil price 20 -30/bbl above 50/bbl
• Reserves limited plentiful
• Afghanistan Taliban/Al Quaida Some form
• of democracy
• Pakistan Less violent Most dangerous
• China Less aggressive aggressive to secure
• to secure access access
• US/EU Indifferent keen to get involved
• Pakistan-India hostile warming up
• Relationship

5
TAPI A NEW PIPE DREAM?
6
Turkmen Gas ReservesDo we know what they are?

• Source BP Statistical Review of World Energy
  Report 2007

7
Turkmen Gas ReservesDo we know what they are?
8
Turkmen Gas Production After reaching a low
point in 98 has been steadily increasing

• Source BP Statistical Review of World Energy 2007

9
Turkmen Gas Sales in 2015One possible scenario
(optimistic?)

• BCM
• Domestic Demand 20
• Export to Russia 60
• Export to Iran 8
• Export to China 30
• Export through TAPI 30
• Export through TCGP 30
• Total sales 178

10
Are gas reserves of Turkmenistan enough to supply
Indias needs?

• Even with all the potential pipelines being
  implemented, Turkmen seems to have adequate gas
  reserves to supply 30 bcm through TAPI if one
  were to accept a more likely gas reserves of 7
  TCM.
• If gas reserves are even 50 of what the
  government of Turkmen Govt. claims then reserves
  are more than adequate and can support even more
  sales.

11
Turkmenistan can get highest netback by selling
to India

• Estimates by author

12
But Russia and China may offer higher netbacks to
win the New Gas Great Game

• Estimates by author

13
How can India deal with gas security issue?

• Like most large gas consumers, India should ask
  Indian gas consumers to have dual fuel burning
  capability. This will cost more. They can be
  compensated by an equivalent reduced gas price.
• Since Turkmenistan is likely to get the highest
  price on its sales to India, it can consider not
  only to compensate for security risk premiums,
  but also investing in the pipeline without
  expecting India to pay for the pipeline
  investment.

14
Potential Revenue losses to Turkmenistan by
forced sale to Russia in 2006

• Sale to Russia 37.5 bcm
• Potential revenue 150 /1000 CM
• Netback 77 /1000 CM
• Potential loss 73 /1000 CM
• Annual loss in 2006 5.7 billion
• Turkmenistan would have lost huge amount on
  its sales in earlier years when netback was as
  low as 35/1000CM.
  

15
TAPI A NEW PIPE DREAM? or A New Gas Great
Game?

• TAPI need not remain a pipedream
• Turkmenistan can finance part of the investment
  to implement their multi vector energy policy
  
• Lessons to learn from Blue Stream, South
  Caucasus, BTC and Failed TCGP.
  
• Blue Stream strategic factors more important
  than apparent economic factors.
  
• South Caucasus(Shah Deniz) and BTC reserves
  owned by MNCs, international financial
  institutions and reasonable(attractive?) transit
  fees.
• Failed TCGP No involvement of IFCs, reserves
  not owned by MNCs, was structured as zero sum
  rather than as win-win.
  

16
TAPI A NEW PIPE DREAM? or A New Gas Great
Game?

• India should have dual fuel capacity
• US, EU and Japan should join the project to
  ensure smooth operations.
  
• Transit countries should be held responsible for
  smooth operations through enforceable penalty
  clauses.
  
• New Gas Great Game needs to be played in a
  different way for stakeholders to be real
  winners.