TAPI gas sale deal likely by end-July - statement

NEW DELHI Thu Apr 28, 2011 8:09pm IST

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NEW DELHI (Reuters) - The governments of Turkmenistan, Afghanistan, Pakistan and India are aiming to sign by July 31 a United States-backed deal to purchase gas worth billions of dollars from Turkmen reserves, a statement said on Thursday.

Oil Minister S. Jaipal Reddy said the pipeline, which is estimated to cost $7.6 billion, was expected to be completed by 2016 but added pricing had yet to be discussed.

"No deliberation on price at this stage because it is a bilateral issue," Reddy said.

The "TAPI" pipeline would transport gas over Afghan soil to consumers in India and Pakistan. But building the pipeline through some of Afghanistan's most volatile regions presents a major challenge, adding to the project's other hurdles such as gas pricing and transit fees.

Parts of the 735 kilometre Afghan stretch will be buried underground as a precaution against attacks, and local communities will be paid to guard it, Afghan Mines Minister Wahidullah Shahrani said in September.

Financing will also be key. Turkmenistan has previously estimated the cost of the project at $3.3 billion, although various estimates have costs running as high as $10 billion. The project is backed by the Manila-based Asian Development Bank.

An Indian official said the partner countries had whittled down their differences and only a few issues such as gas pricing and transit fees remained to be resolved.

Turkmenistan traditionally sends its gas north to Soviet-era master Russia but is becoming an increasingly important supplier to China, Iran and Europe. India and Pakistan, via the TAPI pipeline, would also offer potentially large new export markets.

A former Soviet republic on top of the world's fourth-largest natural gas reserves, Turkmenistan plans to triple gas output to 230 billion cubic metres (bcm) over the next 20 years. With a population of only 5 million, it will export nearly 80 percent.

It expects the pipeline, which will run from the Dovletabad field but may later incorporate gas from the massive South Iolotan deposit now under development, to have initial annual capacity of 33 billion cubic metres.

India and Pakistan have expressed interest in buying up to 70 bcm annually, and the pipeline's capacity could be expanded.

India, Asia's third-largest economy, relies on imports for 70 percent of its huge energy needs. Natural gas currently accounts for about 10 percent of its energy supplies and much of this is imported.

(Reporting by Nidhi Verma; Editing by Krittivas Mukherjee)

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