Struggling to get the $9 billion TAPI gas pipeline underway, its four promoter nations have decided to float a special purpose vehicle to keep the transnational project alive.
The SPV, TAPI Ltd will be formed with Turkmenistan, Afghanistan, Pakistan and India pumping $5 million equity each. India will be represented by state-owned gas utility, GAIL India Ltd.
The Union Cabinet headed by Prime Minister Manmohan Singh may on Thursday consider formation of the Dubai-based SPV, official sources said.
It would also consider GAIL joining the SPV as India representative.
Though the SPV for the TAPI project is listed on agenda for the Cabinet scheduled on Thursday, it may after all not be taken up as Oil Minister M Veerappa Moily is in US on a 10-day visit.
The SPV is being considered for the project as no multinational company is willing to participate in the project unless they get a share in Turkmenistan's rich gas fields.
While Turkmenistan, Afghanistan and Pakistan are of the view that the four promoters could build and operate the pipeline on their own, India has insisted that the project be taken up only if a multinational company leads it.
New Delhi does not want to be at the mercy of Afghanistan and Pakistan for its gas needs and also feels that none of the nominee companies of the four countries has the financial and managerial capability to execute the project.
Sources said TAPI Ltd would scout for a consortium leader who will build and operate the project, while the US government would pursue Turkmenistan to get upstream equity for its multinational. The multinational firm would be responsible for safe delivery of gas through the 1,680-km pipeline from Turkmenistan that will traverse through militancy-infested areas in Afghanistan and Pakistan.
The 1,680-km will carry 90 million cubic metres a day (mmcmd) gas and was scheduled to become operational in 2018. India and Pakistan would get 38 mmcmd each, while the remaining 14 mcmd will be supplied to Afghanistan.
Sources said global energy majors like Exxon Mobil and Chevron are willing to lead the construction of the pipeline only if they get a share in the Turkmenistan gas field.
Turkmenistan has so far refused as its national laws do not permit foreign equity in oil and gas fields on land.
It has agreed to grant service contracts to the overseas investors but that has not impressed the global majors who are unwilling to take financial and operational risks for a less profitable construction and service contract.
The US is backing the TAPI pipeline as an alternative to the Iran-Pakistan-India line in its efforts to choke Tehran financially over its suspected nuclear weapon programme.
While New Delhi had reached agreements on price and transit clauses for the IPI pipeline, TAPI will be the first transnational line for which it signed a Gas Sales and Purchase Agreemet (GSPA) in May last year.
Besides meeting its energy needs, TAPI would be a test of peace between India and Pakistan. More importantly, it will test Islamabad's resolve to normalise trade with its neighbour by allowing safe passage of the gas through the 800 km section of the pipeline passing through its territory.
Also, the 735-km leg through the Afghan provinces of Herat and Kandahar would present significant security challenges.
TAPI will carry gas from Turkmenistan's Galkynysh field, better known by its previous name South Yoiotan Osman that holds gas reserves of 16 trillion cubic feet.
From the field, the pipeline will run to Herat and Kandahar province of Afghanistan, before entering Pakistan. In Pakistan, it will reach Multan via Quetta before ending at Fazilka (Punjab) in India.
Sources said India will pay for the gas only when it is delivered to it at its border. Afghanistan and Pakistan would sign host country agreements to provide security to the pipeline. In exchange, they would get $0.50 per million British thermal unit as transit fee from India.
Ex-Soviet Turkmenistan is promoting TAPI pipeline as a key element in plans to cut reliance on supplies to Russia and to boost annual gas exports to 180 billion cubic metres by 2030.
BP data shows Turkmenistan's natural gas reserves equal to those of Saudi Arabia and behind only Russia, Iran and Qatar.
