Home Digital Magazine April 2018 Issue TAPI: A Dreamer’s Pipe-dream becoming reality?

TAPI: A Dreamer’s Pipe-dream becoming reality?

TAPI is a dream since 1995, when Pakistan, Turkmenistan and the US thought of creating an interdependent South & Central Asia; Dr. Marvin Weinbaum wonders if its time has arrived

TAPI
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Marvin G. Weinbaum & Samad Sadri |

Global demand for energy is increasing and natural gas consumption is growing faster than for oil and coal. In South Asia, industries in Pakistan and India and other major energy consumers are in a desperate search for new sources while reserves in Central Asia remain largely untapped.

A revenue seeking and energy-needy Afghanistan offers the land bridge for the transfer of resources between a gas surplus Turkmenistan to its north and an energy-starved south. A natural gas pipeline has been studied for its feasibility for more than 20 years and now stands the possibility of being built.

TAPI, named after the initials of its participating countries Turkmenistan-Afghanistan-Pakistan-India, is a $10 billion construction project, proposed to carry natural gas from the Galkynysh Gas Field in Turkmenistan to South Asia. The 1814 kilometer long pipeline will have the capacity to transfer 33 billion cubic meters of natural gas annually.

The pipeline would allow a once near hermit, now politically and economically engaged Turkmenistan to increase its trade with a wider array of countries in the region.

About 816 kilometers of the pipeline is designed to pass through Herat, Farah, Helmand, Nimroz, and Kandahar provinces in Afghanistan, from where it will enter Pakistan and pass through the major cities of Quetta and Multan, ending at the Indian Punjab border town of Fazlika. Current plans call for completion of the project by December 2019.

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Background

The idea of a pipeline was first discussed in March 1995, during a meeting between Pakistani Prime Minister Benazir Bhutto and Turkmenistan’s President Saparmurat Niyazov. The pipeline was sought at the time primarily to provide energy resources for the expanding industries of India and Pakistan. Proposals for constructing the pipeline were offered by Unocal, an American firm based in California, and Bridas, an Argentinean firm.

In 1996, when the Taliban gained control over large portions of Afghanistan, officials from both Unocal and Bridas visited Afghanistan for talks with Taliban leaders about the pipeline project. Unocal was awarded the contract, presumably for its record in having been a major contributor to the completion of Baku-Tbilisi-Ceyhan pipeline from the Caspian Sea to the Mediterranean Sea.

Already set back by disagreements on terms and conditions, in March 1998, giving instability in the region as the reason, Unocal announced delay in constructing the pipeline. The project remained dormant until the U.S toppled the Taliban regime and a new government was installed in Afghanistan in 2001. The prospect of a pipeline was revived in 2006 in meetings between Afghan President Hamid Karzai and President Saparmurat.

It also may offer an example of what can be accomplished when suspicion and distrust
are replaced by cooperation among participating countries.

In December of 2010, successor Turkmen president Gurbanguly Berdmuhamedow hosted a TAPI summit in Ashgabat where together with the presidents of Afghanistan and Pakistan, and the Indian union minister for petroleum and natural gas they signed off on the project. The participating countries expressed their willingness to cooperate in taking the necessary steps toward its implementation.

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President Karzai assured his project partners that Afghanistan would take the necessary measures to secure the pipeline during and after its construction. Work on the pipeline was scheduled to begin in 2010 and to start supplying gas by 2015. But the project was again put on the shelf by the growing insurgency-driven insecurity in Afghanistan.

Finally, in February 2018, the four countries directly involved in TAPI agreed to go ahead with the pipeline’s construction. This after settling on transit fees and being assured of $750 million in Saudi Arabia’s Islamic Development Bank funding, and Turkmenistan’s willingness, drawing from a consortium of investment sources, to assume the lion’s share of financing the project.

TAPI’s Potenital for the Region

TAPI is an attractive project for all countries involved. Turkmenistan stands to most directly profit from TAPI by be- coming a significant regional supplier of energy. It is a natural gas-rich country and its resources are in great demand from fast-growing industrial globalizing countries of South Asia. Despite Turkmenistan’s huge gas reserves, the sixth largest in -the world, it only has access to the Russian, Iranian, and Chinese markets.

A recent rise in the number of insurgent attacks in those and adjacent areas indicates that Afghan security forces probably lack the capacity to ensure protection along its full course.

TAPI pipeline would allow a once near hermit, now politically and economically engaged country to increase its trade with a wider array of countries in the region and especially to strengthen relations with Afghanistan, Pakistan, and India. The only possible route for a natural gas pipeline to India, where it can connect to an already built domestic pipeline, runs through Afghanistan and Pakistan.

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Underdeveloped Afghanistan, set back by decades of war and turmoil, finds that much of its economic future hinges on opportunities coming with expanded regional economic interconnectivity. The Afghan government estimates that it will gain $400 to $500 million annually through transit duties from the pipeline along with 5 million cubic meters in the first 10 years, and after that up to 1.5 billion cubic meters of gas annually for domestic consumption.

The pipeline will also have still wider economic and social consequences. The Ashgabat government has announced that it would also finance a new high-voltage transmission power line and extend a railway from Turkmenistan to the border of Afghanistan. The power line will bring 500 kW of power to Afghanistan and the Turkmen government will cover the cost of the 13 km rail project, estimated at $1.5 million.

In addition to these numerous economic opportunities, plans are to have it built along the Kandahar-Herat Highway, where a fiber optic cable will be laid that will newly provide access to the Internet to many thousands in rural areas. A successful TAPI also has the potential to ease Afghanistan’s domestic security tensions and strengthen foreign relations with its neighboring countries.

Unocal was awarded the contract, presumably for its record in having been a major contributor to the completion of Baku-Tbilisi-Ceyhan pipeline from the Caspian Sea to the Mediterranean Sea.

For Pakistan and India, TAPI offers the possibility of a much sought after sustainable source of energy. Growing economies are contingent on increasing supplies of reliable energy. Natural gas, so important in its contribution to industry, has major residential and commercial uses as well, including fertilizer production and transportation, whereas power shortages can help to undermine governments and play a part in the political unrest. TAPI is also expected to play a role in the China-Pakistan Economic Corridor (CPEC) in helping to provide the energy resources that will be critical to the envisioned economic growth.

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Current Challenges facing TAPI

For all of TAPI’s economic benefits for the participating countries, the pipeline’s construction and implementation faces formidable challenges. An expanding insurgency in Afghanistan, the mutual suspicions between Afghanistan and Pakistan, security conditions along the Pakistan-Afghanistan border, separatist group violence inside Pakistan, and the distrusting relationship between Pakistan and India all threaten the implementation of the TAPI pipeline. Unless those chal- lenges are surmounted, realization of the potentials of TAPI will remain a pipe dream.

Exclusive infographics about Pakistan's Gas Industry from the GVS magazine.

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Uppermost among the project’s obstacles is the threat posed by the ongoing insurgency in Afghanistan. The pipeline’s scheduled path runs through the heavily contested Herat, Farah, Nimroz, Helmand, and Kandahar provinces. A recent rise in the number of insurgent attacks in those and adjacent areas indicates that Afghan security forces probably lack the capacity to ensure protection along its full course.

In Farah province fighting has been so severe between the government’s forces and the Taliban that hundreds of families have been forced to leave their homes. On the day after the February 2018 inauguration of pipeline construction in Herat province, the Taliban mounted multiple back-to-back attacks in neighboring Helmand province.

In South Asia, industries in Pakistan and India and other major energy consumers are in a desperate search for new sources while reserves in Central Asia remain largely untapped.

Yet on the very day of TAPI’s inauguration, the Taliban issued a statement offering to protect the pipeline. It announced that because the pipeline proposal had, after all, been discussed during the rule of the Emirate, their leaders understood the economic development significance of the project for the country and have no objection to the undertaking. The real motives behind a promise to allow the project to go forward may be less charitable, however. Wherever present the Taliban have a reputation of extorting money from local enterprises.

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The Taliban can easily hold the project hostage as a means of extracting protection money from the government while and after the pipeline has been built. Moreover, even were if the senior leadership to resist in practice, it is less than certain that all of the commanders in a now more decentralized movement would desist, or that non-Taliban insurgents would do the same.

To address security issues President Ghani has promised a special security task force to protect the pipeline. The pipeline is scheduled to run along the country’s major artery, the Ring Road, and the government is hopeful that together with those forces already deployed to provide security on the highway, that dangers to the pipeline can be minimized.

Some have suggested building the pipeline underground to keep it safe from the risk of explosion and other attacks. However, the pipeline is constructed and security forces deployed to protect it, a pipeline is always extremely vulnerable. Probably the government’s best prospect for improving pipeline security lies in the communities through which it will pass.

The real motives behind a promise to allow the project to go forward may be less charitable, however. Wherever present the Taliban have a reputation of extorting money from local enterprises.

The benefits provided by the pipeline – the employment of local residents, access to electricity, gas, and Internet – can give local people the incentive to protect it. As a side benefit, the jobs created may divert some of them from joining insurgent groups. In fact, not long after the construction was formally approved, a group of 70 Taliban fighters in the Herat area publicly announced their readiness to lay down their arms in exchange for being employed on the pipeline project.

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Other Challenges

Afghanistan is not the only security challenge for the construction and operation of a gas pipeline. In Pakistan, which shares a 2,430 km border with Afghanistan, the Tehrik-e-Taliban could find TAPI a tempting soft target in its efforts to weaken Pakistan’s economy and discourage cooperation between the Islamabad and Kabul governments. The routing of the pipeline through Balochistan and not through FATA is worrisome for Pakistan as armed groups demand greater control over the province’s natural resources and political autonomy.

Previously the Baloch militants have demonstrated their ability to undertake terrorist attacks against civilians and military personnel in Quetta where the TAPI pipeline is expected to pass. Elsewhere in the province, these groups have already shown a willingness to sabotage development activities at Gwadar. This violence that threatens the $62 billion China-Pakistan Economic Corridor (CPEC) could similarly challenge the security of the TAPI pipeline.

Although a division of Pakistan’s army has been assigned to protect CPEC-related projects in Balochistan and thousands of soldiers will presumably be deployed in Afghanistan to secure the path for a pipeline on its side, it remains to be seen whether the Islamabad government will do the same for the TAPI project.

The answers to these questions will not only inform us about the region’s future energy environment, but also whether its countries can apply lessons taken from TAPI to address the many issues that divide them.

Aside from security issues, Pakistan has to deal with its economic and trade-related issues. Afghanistan, Pakistan, and India have each agreed to pay $500 million for their contribution to the construction of the TAPI pipeline. Pakistan’s ability to make that payment comes at a time when its international reserves have declined from $7.5 billion in 2016 to negative $0.7 billion in mid-February 2018.

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Payment of its share of the construction means having to resort to borrowing more money. Pakistan is already facing a budget deficit and its current external debt and liabilities are at $88.89 billion, which expected to increase in the fiscal year 2019. Pakistan’s ability to take out more loans is getting weaker due to its current and projected financial health.

These concerns also come at a time when Pakistan faces the possibility of being blacklisted by the 37-nation Financial Action Task Force (FATF) for failing to comply with anti-terrorism and money laundering regulations. Although Pakistan, now on a “gray list,” is likely to submit an action plan that will enable FATF to eventually delist the country, the designation is at least in the short to medium term seen as endangering Pakistan’s banking links abroad.

The listing is certain to bring extra scrutiny from regulators and may have a chilling effect on trade and investment. This may ultimately impact Pakistan’s ability to implement large-scale infrastructure projects like TAPI.

This violence that threatens the $62 billion China-Pakistan Economic Corridor (CPEC) could similarly challenge the security of the TAPI pipeline.

TAPI could face the same fate as Iran-Pakistan-India (IPI) pipeline. In 1999, Iran, Pakistan, and India signed an agreement to build a pipeline that would transfer Iran’s energy sources to Pakistan and India. By 2009, India withdrew from the agreement citing concerns over security issues in Pakistan. In 2012, Iran and Pakistan announced their readiness to go ahead with the construction of the pipeline from Iran to Pakistan (IP). Iran has completed its part of the pipeline but Pakistan has not.

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A clause in their IP agreement calls for daily fines of $1 million for failing to meet specified obligations. Iran has delayed in going to the International Court of Justice to demand payment but is now prepared to proceed with its case against Pakistan. Although Pakistan points to uncertainty over Iran’s nuclear deal with the United States as preventing it from implementing its part of the pipeline, but the security concerns in Balochistan province are similar to those in the TAPI project play an important role in blocking the IP.

There is additional concern over whether India will keep its commitments to the pipeline once completed in Afghanistan and Pakistan. It could withdraw as it did from the agreement for Iran’s natural gas. Despite close ties with Afghanistan and the desire to see an economy under the Kabul government strengthened by constructing a pipeline, India may well decide to renege on TAPI for fear of becoming in any way strategically dependent on Pakistan.

Rather than the Indus Waters Treaty of 1960 as the model for building bilateral trust, India has often expressed its concern about being placed at the mercy of Pakistan for delivery of any part of its energy requirements.

Prospects of TAPI

The prospects are reasonably good that the TAPI pipeline will eventually be built. The long-awaited economic and political commitments have finally fallen into place. The project represents a possible milestone in progress toward realizing the potential fruits of greater regional interconnectivity. It also may offer an example of what can be accomplished when suspicion and distrust are replaced by cooperation among participating countries.

The routing of pipeline through Balochistan and not through FATA is worrisome for Pakistan as armed groups demand greater control over the province’s natural resources and political autonomy.

The project’s construction is, however, likely to take considerably longer than the 2019 target for completion, and still longer before it can be expected to become fully operational. In the meantime, there are lingering questions about whether it will become a reliable energy source and an economically feasible project over the long run.

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Will TAPI gas face competition from other possibly more reliable sources that may come on line? What will happen if the Iran-Pakistan pipeline is fully constructed or if liquefied gas from the Gulf States and Iran become price competitive? Could Turkmenistan forsake TAPI for a more lucrative China market? How will U.S. policy in the region impact the decisions of TAPI participants?

Can Afghanistan be depended on to be a good custodian of the pipeline, especially should is armed conflict intensify? And will Pakistan’s Baloch separatists, sensing another provincial development benefit denied to them, undermine the pipeline. The answers to these questions will not only inform us about the region’s future energy environment, but also whether its countries can apply lessons taken from TAPI to address the many issues that divide them.

Marvin G. Weinbaum is Director of Afghanistan and Pakistan Studies at the Middle East Institute in Washington DC, and Professor Emeritus at the University of Illinois at Urbana-Champaign. Samad Sadri is a research associate at the Middle East Institute.


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