South Asia Gas Enterprise (SAGE), a joint venture between the Siddhomal group, an Indian firm and UK based Deep Water Technology Company, is the special purpose vehicle (SPV) for undertaking this project. It will take five years for this project which will have a capacity of 31.1 million standard cubic metres of gas a day after completion. The SAGE SPV has also signed a cooperation agreement with GAIL (India) Ltd on the project apart from finalizing a memorandum of understanding with National Iranian Gas Export Co for developing gas exports including swaps from Iran to India through this route.

In a related development, SAGE has appointed consulting and accounting firm Ernst & Young to help it prepare a report on financial viability of the project. The project will cost US$ 3 billion. A group of Indian firms comprising Oil India Ltd and Indian Oil Corporation have been assigned the Farsi natural gas block in Iran, a country which is facing US economic sanctions. OVL which had won the bid in 2002, is the operator in the Farsi block with a 40 per cent stake. Indian Oil and Oil India Ltd have 40 per cent and 20 per cent stakes respectively. While the Indian consortium does not have ownership rights, it will be paid a 15 per cent rate of return on investments made once they are awarded development rights.

According to SAGE sources, the proposed sub sea pipeline will meet the additional gas requirement of the UAE, Oman and India besides easing gas transportation issues of producing countries like Iran, Turkmenistan, Qatar and will pass through the UAE and Oman, all the way to India. For the gas to be routed to Oman from Qatar, Iran and Turkmenistan, additional pipelines will be needed. Gas sourced through this will carry an additional transportation tariff which will accrue to SAGE. India imports around 26 mscmd of LNG. The country is short on natural gas. It needs around 180 mscmd while the supply is only 106 mscmd.

SAGE is now talking with OVL for getting the Farsi gas from Iran to India. The JV is also exploring the possibility of a gas swap arrangement with Turkmenistan. While the SAGE officials are very optimistic and going ahead with all discussions, Indian petroleum ministry is yet to take a final decision. It will give go ahead signal only after the financial viability report to be presented by Ernst & Young is studied. There are security issues also which the Indian Government officials are assessing.

Meanwhile, India, right now, is persuing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) project and is going slow in respect of discussions over IPI project. The Indian government gave its nod to the TAPI project agreement at the Ashgabat meeting in December 2010 and it has been agreed after a series of meetings that the gas purchase agreement will be signed by four countries after detailed discussions at both financial and technical levels by July 31, 2011.

Prime Minister’s Office in India has been most vocal proponent of the TAPI project though the external affairs ministry officials had reservations and they were not in a hurry to give nod to the project in principle at the December meeting. Now, hectic negotiations are on and the Americans have also impressed on the Indian side that both Afghan Government and the Pakistan Government will take care of the security aspects of the gas supply to India from both Afghan and Pakistani areas.

US side has ensured that Afghanistan Government provides security to the pipeline in the militants prone areas by deploying more than 12,000 military forces. US officials have also told India that on the Pakistani areas through which the gas pipeline will come to India, will be made clear of the mujahids and the other militants by the Pak army and US officials will monitor it.

Security is the major issue which is worrying the Indian side and the US officials have given strong indications to the PMO and especially to the Prime Minister Dr. Manmohan Singh that the US has taken up the issue of ensuring security to the supply to Indian side by monitoring the arrangements of security measures in both Pakistan and Afghanistan. The TAPI gas pipeline will cross Afghanistan’s southwestern provinces of Kandahar and Helmand which are under the influence of Taliban, as well as some of Pakistan’s tribal areas where the Pak administration’s writ does not run.

Turkmenistan which holds the world’s fourth largest natural gas reserves is highly interested in this gas pipeline since it will help it to acquire access to Pakistan and Indian markets. The project partially financed by the Asian Development Bank envisages the building of the 1735 kilometer pipeline with a total gas capacity of 90 million cubic metres per day. As per present plans, the multibillion dollar gas pipeline project will generate 12,000 jobs in Afghanistan besides providing annual transit fees. The pipeline will be laid from Turkmenistan to Multan ending at the Indian city of Fazilka. It is proposed to start delivery of gas by 2016 and it will go through South Yolotan gas field of Turkmenistan to Harat, Kandhahar, Chaman, Quetta, Multan and the Indian city Fazilka.

Under the estimated US$ 7.5 billion TAPI gas pipeline project, Pakistan’s share will be 1.35 billion cubic feet per day out of total of 3.2 billion cubic feet per day gas imports. Inter governmental agreement and Gas Pipeline Framework Agreement have already been signed and four participating countries have targeted to sign Gas Sales Purchase Agreement by July 31 this year. The Americans are helping in ensuring finances for the TAPI project and China is also engaged in discussions with the ADB for participation in the construction of the project. Chinese companies are backed strongly by their cash rich banks and the discussions with ADB are continuing. (IPA Service)