ADB to assume transaction advisory role for historic regional gas pipeline

Ashgabat, Turkmenistan: The Asian Development Bank (ADB) has been appointed transaction adviser to help attract a commercial consortium leader of global repute that will build, own and operate the planned 1,800-km Turkmenistan–Afghanistan–Pakistan–India (TAPI) natural gas pipeline.

"We are grateful for the confidence the parties have in ADB to help move this important gas project one step closer to fruition,” said director general of ADB’s Central and West Asia Department Klaus Gerhaeusser. "It will bring multiple benefits to the participants, including access to new markets, enhanced energy security and job opportunities, and have transformational impact on regional cooperation and boost other initiatives aimed at bringing peace and stability to the region."

Under an agreement signed with the countries’ state gas firms, ADB will advise on the establishment of the TAPI pipeline company, undertake technical due diligence, and handle the bidding and selection of a commercial consortium leader to build, own and operate the pipeline.

The company will be jointly owned by the four state gas firms: State Concern 'Turkmengas', Afghan Gas Enterprise, Inter State Gas Systems, and GAIL (India) Ltd. When selected, the commercial consortium leader will take a majority stake in the company.

The project, earmarked for completion in 2017 by the four countries, will aim to export up to 33 billion cubic meters of natural gas a year from Turkmenistan―with the world’s fourth-largest proven reserves―to Afghanistan, Pakistan, and India over 30 years. It will allow landlocked Turkmenistan to diversify its gas export markets to the southeast, provide a vital new fuel source for developing southern Afghanistan, and help Pakistan tackle chronic fuel shortages. In India, it will allow the northern region to access a steady supply of gas to fuel its economic growth.

ADB has provided secretariat services for the development of the legal and institutional framework of the TAPI project since 2002, and more than $4 million in technical assistance. The pipeline was estimated to cost about $7.6 billion in 2008, but the final amount now could be substantially different.

Historic agreements bring long-awaited TAPI Pipeline closer to reality

After more than 20 years of delicate negotiations, a 1,800-km natural gas pipeline that connects one of Central Asia’s largest energy suppliers with South Asia’s critically underserved market has come one step closer to reality, marking an unprecedented new chapter in regional relations.
GAIL (India) Ltd and Pakistan’s Inter State Gas System (Pvt) Ltd today signed Gas Sales and Purchase Agreements with Turkmenistan that will lead to the supply of up to 90 million cubic meters of natural gas a day via the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline. Afghanistan also signed a Memorandum of Understanding (MoU) on long-term gas cooperation with Turkmenistan.
“This is a truly historic moment of unparalleled regional cooperation,” said Klaus Gerhaeusser, Director General of the Central and West Asia Department at the Asian Development Bank (ADB), which has acted as the TAPI Secretariat since 2002.
ADB has played a leading role in coordinating and facilitating the TAPI negotiation process over the past 10 years.
The bulk of exported gas will help meet surging energy demand in India and Pakistan – where energy needs are set to double by 2030 – while the remainder will alleviate chronic power shortages in Afghanistan.
“The pipeline represents a win-win scenario for each TAPI country, as it will give Turkmenistan with the world’s fourth largest reserves more diverse markets and helps fuel the energy-hungry economies to the South,” Gerhaeusser said, adding that each country stands to gain, making this not only the ‘Peace Pipeline,’ but a pipeline to prosperity as well.
With the TAPI pipeline in place, Turkmenistan’s gas will reach a greater range of overland markets, diversifying from its existing markets in Russia, Iran, and the People’s Republic of China.
A Gas Sales and Purchase Agreement between Afghanistan and Turkmenistan is expected to be finalized shortly. The next step is for the four TAPI nations to attract commercial partners to build, finance, and operate the pipeline, estimated in 2008 to cost at least $7.6 billion.