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Tapi agreement set to expand India's gas basket

Ajay Modi  |  New Delhi 

India on Wednesday signed the gas sale purchase agreement (GSPA) for the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline, which upon completion would diversify its gas basket. With domestic gas output stagnating, the $7.6-billion Tapi gas project provides a ray of hope.

In five years, the country would have access to imported natural gas, in addition to imported liquefied natural gas and domestic sources, including coal bed methane gas.

However, despite the increased supply, prices would inch higher. Though Reliance Industries (RIL)’s gas price of $4.2 a million British thermal units (mBtu) is the current benchmark for domestic natural gas, it is due for revision in 2014. Petronet LNG (PLL), the only importer of long-term natural gas, would also see a price rise by its Qatari suppliers.

While the government statement did not mention the price at which gas would be imported, the landed price of gas would be cheaper than the import price of Qatari gas in 2018. Qatar’s RasGas charges 12.67 per cent of Japanese crude cocktail and Petronet pays an additional $0.26 per mBtu for shipping the gas in its liquid form from Qatar. This currently costs $8-10 per mBtu. “Different sources will come at different price, but the availability is important from a future perspective,” said Dilip Khanna, partner (oil & gas practice), Ernst & Young.

Securing gas from external sources has become crucial for India, as the nation faces a sharp rise in demand from sectors like power and fertilisers, while no major increase in domestic production is lined up. The $7.6-billion Tapi project envisages building 1,680 km of pipeline, with a total gas capacity of 90 million standard cubic metres per day (mscmd). Afghanistan and Pakistan have committed to the safety and security of the pipeline.

Of the 90 mscmd gas the pipeline would carry from Turkmenistan, Afghanistan would consume 14 mscmd, while India and Pakistan would account for 38 mscmd each. GAIL would import Turkmenistan gas for India, once the pipeline becomes operational in 2018. The gas would be supplied for a 30-year period.

The Indian market is eagerly awaiting the commissioning of the Tapi pipeline. India’s natural gas sector is projected to grow at a compounded annual growth rate of 19.5 per cent over the next five years. Consumption is expected to grow from the current 166.2 mscmd to 473 mscmd in 2017, Petroleum Minister Jaipal Reddy said at the GSPA signing ceremony in Turkmenistan.

Industry experts, however, say India should have negotiated for a higher quantity, considering the widening demand-supply gap. A K Balyan, managing director and chief executive, Petronet LNG, the country’s biggest gas importing company, said, “I think the country should have sought higher volumes. When it actually comes in the next five years or so, this quantity would be small to make a huge impact on the domestic gas availability. It does not impact companies like us. Considering the opportunities available, we welcome more pipelines and gas terminals.”

First Published: Thu, May 24 2012. 00:08 IST