Bangladesh has set its eyes on the TAPI pipeline
Bangladesh has recently approached the Asian Development Bank (ADB) for joining TAPI -- Turkmenistan-AfghanistanPakistan-India -- gas pipeline project. It has conveyed to ADB that it needs gas from sources outside the country as its own reserves are dwindling despite initiatives to explore hydrocarbon in the offshore blocks of the Bay of Bengal. Dhaka also wants to join the TAPI project as a similar decade- old, three-nation project involving Bangladesh, India and Myanmar is now virtually non-existent due to the source country Myanmar’s apathy.
The TAPI pipeline is nearly 1680 kilometers long with a transit length of 735 kilometers in Afghanistan and about 800 kilometers in Pakistan. The 56-inch diameter pipeline is expected to cost US$7.6 billion. The proposed pipeline will extend by another 700 kilometers if it connects Bangladesh’s internal gas network. According to many experts, it is both feasible and possible, if agreed to by all parties.
At the moment, Bangladesh’s total gas output is around 2,180 million cubic feet per day (mmcfd) against its own requirement of more than 2,500 mmcfd. The country anticipates substantial increase in demand once industries and housing units under construction are completed. This is forward thinking and sound future planning on the part of Bangladesh. According to some analysts, Bangladesh is not in dire need of gas at the moment but this initiative is part of the new ‘Silk Road Strategy’ unveiled by US Secretary of State, Hillary Clinton, during her recent visits to Bangladesh and India, where she emphasized that Kolkata should become a hub connecting countries in the East, South and Central Asia. This strategic move, they speculate, is aimed at countering Iranian and Chinese influence in the region.
Bangladesh’s desire to join TAPI at this point when Afghanistan has refused to take its share makes a lot of sense. Bangladesh would be a beneficiary of a project that has long-term advantages for the entire region. It is worthwhile to note that TAPI is going to be handled by a single sponsor. This sponsor as well as Turkmenistan, Afghanistan, Pakistan and India should have no reservations on Bangladesh becoming the fifth member of the agreement. The pipeline is expected to be completed by mid-2017. The price of Turkmen gas is less than Iranian gas and this is a great incentive for Bangladesh to enter into the agreement at this time.
The finalized price of Turkmen gas is 60 percent of the Brent price but comes to 70 percent at the border after inclusion of transit fee and
other incidentals. At the current level, Pakistan would be saving $1 billion compared to the price offered by Iran. This might have induced Bangladesh to avail a cheaper source.
The United States is highly annoyed with Pakistan for not abandoning the IP project despite immense pressure from its side. Pakistan’s argument is that it has to overcome an energy deficit of 2 billion cubic feet per day that is causing chronic power shortages of 5,000 MW, retarding the GDP by 3 percent per annum. Pakistan has, however, been facing funding issues for laying down the gas pipeline infrastructure for Iranian gas. In March, the world’s largest bank, Industrial and Commercial Bank of China Limited (ICBC) after agreeing to finance Pakistan’s side of the pipeline, shied away, succumbing to US pressure.
Pakistan will be subjected to a heavy penalty if it fails to import gas from Iran in 2014. Iran has already informed Pakistan that the gas infrastructure on its side is 90 percent complete. Interestingly, with a decline in the global supply of Iranian oil, following the ban imposed by the US and Euro- pean Union, Tehran has now offered to provide all the oil Pakistan needs on a 90-day deferred payment basis and confirmed financing of $250 million on a government-to-government basis. Additionally, Iranian commercial banks have also offered financial assistance to Pakistan, which is seeking financing of over $500 million from Iran for the IP gas pipeline project.
In this backdrop, Bangladesh’s entry into TAPI can be a move to appease the United States in its new ‘Silk Road Strategy.’ But predominantly, it is eager to connect with TAPI to ensure an alternate to its growing fuel demand in the coming years.
Turkmenistan has the world’s fourth-largest gas reserves and energy-hungry South Asian countries are keen to tap this source in the changing global scenario where the United States strongly opposes any purchase of energy resources from the oil and gas-rich Iran. The Indian cabinet has already approved a proposal to purchase Turkish gas after assurance from the Taliban that they would not sabotage the project. Indians say that they would move ahead with the project especially after Bangladesh’s Power Development Board made a request to join hands. It proves beyond doubt that India and Bangladesh are now working very closely on energy projects in which the West has substantial interests as part of the strategy stressed upon by Hillary Clinton during her visit in the early part of May 2012.
Notwithstanding the zeal shown by the Bangladesh government, many independent analysts are of the view that gas from Turkmenistan would not be cost-effective for Bangladesh. Last year, the Russian oil monopoly, Gazprom made a proposal to Bangladesh to develop a cross-border gas pipeline with neighboring India and Myanmar. The deal was supposed to facilitate an integrated geographical area of gas and oil exploration. A similar proposal for a tri-nation gas pipeline through Bangladesh was raised earlier during the last BNP-led four party alliance, but the negotiations failed due to the then government’s political stance and imposed conditions.
The US and its allies want all countries in South Asia to pursue TAPI as Turkmenistan gas reserves lie mainly with Western giant companies. Bangladesh’s zeal to join TAPI can be seen in this geo-political perspective, besides the undisputed fact that its output is much lower than its current need and this gap is going to widen significantly in the coming days. Bangladesh is moving prudently to avoid mistakes committed by Pakistan, which is suffering because of short-sightedness, lack of long-term planning and poor vision on the energy front. Dr. Ikramul Haq and Huzaima Bukhari are partners in the law firm Huzaima & Ikram (TAXAND Pakistan) and are Adjunct Professors at the Lahore University of Management Sciences (LUMS).