Pipe Dream

Bangladesh has set its eyes on the TAPI pipe­line

Southasia - - Contents - By Huza­ima Bukhari & Dr. Ikra­mul Haq

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).

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