Turkmenistan gas to cost $13/MMBtu

India agreed to pay equivalent to 55% of crude oil price when it signed agreements to buy gas through TAPI

India will pay close to $13 per million British thermal unit for natural gas it will buy from Turkmenistan through a pipeline passing through Afghanistan and Pakistan, almost three times the rate government has fixed for domestic gas producers.

India yesterday agreed to pay a rate equivalent to 55% of crude oil price when it signed agreements to buy gas through the US-backed Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline in the Caspian Sea resort of Avaza, sources said.

At $100 a barrel for oil, the indexation agreed to translate into a price of $9.17 per mmBtu in Turkmenistan. Added to this would be a $0.495 per mmBtu transit fee India will pay to Afghanistan for allowing passage of the pipeline through its territory and $1.83 in wheeling/transportation charges.

The landed cost of gas on Pakistan border would be $11.50 per mmBtu. On top of this, India will pay $0.495 per mmBtu as transit fee to Pakistan and another $1 as wheeling charge for the 800-km pipeline section from Quetta to Fazilka (Punjab) in India.

The landed price of natural gas on Indian border would thus translate into $12.99 per mmBtu, they said.

This rate is almost three times the $4.20 per mmBtu price which Oil and Natural Gas Corp (ONGC) and Reliance Industries get for producing natural gas from domestic fields.

The higher rate agreed is in contrast to the stand Oil Ministry had taken in stonewalling a request from RIL and its partner BP for a revision in price of natural gas produced from eastern offshore KG-D6 fields.

In blocking RIL-BP request, it argued that a higher gas price would lead to increase in power tariff and cost of fertiliser, thereby entailing higher government subsidy outgo. But the same would be true for TAPI gas as well.

Sources said if domestic producers are paid a higher price, the government gains most by way of higher royalty and taxes and profit petroleum it would earn.

"It is strange that the government is willing to pay higher price to foreigners but not to domestic companies," an industry official said.

TAPI pipeline is nearly 1,680-km long and the transit length in Afghanistan is 735 kilometres and in Pakistan is nearly 800 km or more. The 56-inch diameter pipeline is expected to cost $7.6 billion.

It will run from Turkmenistan's Yoloten-Osman gas field 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.