Cabinet to consider SPV for TAPI project on Thursday
New Delhi: Struggling to get global energy majors who can build the USD 9 billion TAPI gas pipeline, 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 in USD 5 million equity each. India will be represented by state-owned GAIL India Ltd.
The proposal for formation of the Dubai-based SPV and GAIL being India nominee is listed for consideration of the Union Cabinet for its meeting slated for Wednesday morning, official sources said.
The issue however may 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 have 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 SPV would be responsible for safe delivery of gas through the pipeline that will traverse militancy-infested areas in Afghanistan and Pakistan.
The 1,680-km pipeline will carry 90 million cubic metres a day (mmcmd) of gas and is scheduled to become operational in 2018. India and Pakistan will get 38 mmcmd each, while the remaining 14 mcmd will be supplied to Afghanistan.
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. In all, the pipeline would travel 735-km in Afghanistan and another 800-km in Pakistan.
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.
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 USD 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.