Will gas OPEC have final say on pipeline plans?

Will gas OPEC have final say on pipeline plans?
13:05 | 30/ 04/ 2008

MOSCOW. (Igor Tomberg for RIA Novosti) - Last week, Pakistan, Turkmenistan, Afghanistan and India signed a framework agreement to build a Trans-Afghan Pipeline (TAP) by 2015.

This news once again shows that energy security and the high demand for Central Asian hydrocarbons continue to be at the top of the global agenda.

At the same time, on April 28, experts from the Gas Exporting Countries Forum (GECF) met in Tehran to discuss the charter of the so-called gas OPEC. GECF energy ministers are expected to finalize the latter's formation this summer in Moscow. This event may seriously change the situation on the global gas market.

With a projected capacity of over 30 billion cubic meters of gas per year and a length of 1,680 kilometers, TAP will cost almost $8 billion. As before, Russian experts are doubtful about this project's success for a whole number of economic, technical and political reasons.

The pipeline is supposed to be filled with gas from the Dovletabad deposit in Turkmenistan, but its resources have not yet been proven. It is also not clear how much gas can be produced by Turkmenistan. Its gas resources are estimated between 8 and 20 trillion cubic meters (BP puts them at a mere 2.9 trillion cubic meters).

In 2007, Turkmenistan produced about 70 billion cubic meters of gas. As of today, it has contractual commitments to Russia's Gazprom and Iran for all of its gas. Russia is planning to buy 80-90 billion cubic meters from it a year until 2028. Moreover, Turkmenistan has signed a framework agreement to supply China and India with 30 billion cubic meters of gas each, starting next year.

It is abundantly clear that TAP is primarily a political project for Turkmenistan. It will gain from this project even if it is never carried out. The framework agreement is supposed to show that Turkmenistan has lots of options and may bargain with its best clients.

TAP is the fourth or fifth project of the Turkmen government. All in all, its gas pipeline plans are estimated at over 200 billion cubic meters, which is three times higher than the current production level. It may simply not have enough gas.

Moreover, there are political risks as well. The pipeline's Afghan leg will be 830 km long. Military tensions in Afghanistan may thwart its construction. Pakistani-Indian relations are not trouble-free either.

There are other difficulties as well. Afghanistan's geological conditions may be unfit for the pipeline. Afghanistan also has no railways, which complicates the project and increases its costs, because trucks will have to bring the pipes from Turkmenistan and Pakistan via the Kandagar road.

India is pleased to be a partner in the Iran-Pakistan-India (IPI) gas pipeline project, which is an alternative to TAP. A gas pipeline from Iran to Pakistan and India with a price tag of $4.1 billion and a length of 2,700 km is supposed to be built next year. Starting in 2010, India and Pakistan expect to receive 35 billion cubic meters of gas per year, and twice as much in 2015. The two projects are not superfluous - India and Pakistan need more gas than they can produce. Gazprom is very enthusiastic about IPI, and is even eager to invest in it in exchange for a share in the consortium.

The Russian-Iranian gas tandem is not a secret. On the one hand, Tehran is quite rightly positioning itself as the only source of gas for the Nabucco project. Politically, in its conflict with the United States, Iran is trying to exploit the European Union's interest in finding sources of gas outside Russia. In turn, Russia wants to prevent its potential rival from reaching out to Europe by re-orienting Iranian gas eastward - to India, Pakistan and China.

At the same time, Russia is stepping up its participation in developing Iranian gas deposits. Last week, Gazprom signed a contract with the National Iranian Oil Company (NIOC) to drill and produce oil and gas in Iran, take part in prospecting, and invest in its economy. The sides have also agreed to set up a joint energy company to develop two or three blocks of the South Pars gas deposit.

In the near future, the Russian gas monopoly will produce large amounts of gas in Iran. Although Iran allows foreign companies to be reimbursed only with money rather than gas, Gazprom will be able to exert serious influence on the directions of its gas exports.

Experts working in Tehran to finalize the future gas OPEC's charter are supposed to compose it from two documents prepared in Moscow and Tehran. Iran wants to involve Gazprom in its hydrocarbon projects as much as possible because it wants to set up a serious organization of gas exporters. Considering that American sanctions are making it difficult for Iran to attract Western investment, Tehran is also trying to get a partner and political ally in the diplomatic war with the West, a part of which is the formation of the gas OPEC.

In this context, Russia is ready to offer Iran and India one more route to consider for Iranian gas supplies to India that bypasses Pakistani territory. This project is similar to Nord Stream, and will pass in the shallow shelf waters of the Arabian Sea outside Pakistan's economic zone. This project may become a certain guarantee for the Indian economy and power industry against moody Pakistan.

To sum up, for the time being TAP is no threat to Russia's gas interests. Moreover,

Moscow's active involvement in gas supplies to South Asian countries may bring it more dividends and enhance its position as a leading gas exporter.

Dr. Igor Tomberg is a senior research fellow at the Center for Energy Studies, the Institute of World Economy and International Relations at the Russian Academy of Sciences.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.