Never say never. This is what energy experts usually advise when it comes to pipeline projects. This is especially true when it comes to the former Soviet Union. Everyone remembers how for example the Baku – Tbilisi – Ceyhan (BTC) oil pipeline became reality, in 2005, after years being considered nothing more than a pipe dream. That's why we should be cautious when talking about the TAPI (Turkmenistan – Afghanistan – Pakistan – India) gas pipeline, even if today almost everyone dismisses it as a "ridiculous" project, as it was described to us recently by a senior player at a big international oil and gas company.
This 1,800 kilometers long pipe project has a long and eventful history. In 1995, as the newly independent Central Asia republics sought not to be dependent exclusively on Russia to export their hydrocarbons, a first memorandum of understanding was signed between the governments of Turkmenistan and Pakistan. Some foreign companies, first an Argentinian, the Bridas Corporation, then an American, Unocal, decided to promote this trans-Afghanistan pipeline. The latter won. On 21 October 1995, Unocal signed an agreement with Saparmurat Niyazov, the then Turkmen president, and created the Central Asia Gas Pipeline consortium (CentGas). Even the Taliban looked positively at the project, and agreed to talk with the Americans.
But hopes were soon dashed, after Osama bin Laden, the Taliban's friend and mentor, ordered the bombing of the American embassies in Nairobi and Dar es Salaam, on 7 August 1998. The pipeline negotiations immediately halted. It was only from December 2002, after the overthrow of the Taliban following America's post-9/11 invasion, that a new TAPI deal was signed by the leaders of Turkmenistan, Afghanistan and Pakistan. But the project stalled because of the insecurity in Afghanistan. Until today.
Last October, President Obama wrote a letter to his Turkmen counterpart, Gurbanguly Berdymukhamedov, to express his support for TAPI. It is unlikely that the letter really counts for too much, but, following the advises of the neo-conservator Central Asia specialist Frederick Starr, the Obama administration decided to publicly support TAPI once more. Washington probably follows its old principle: "Happiness is multiple pipelines". It might be also a way to say that after 2014, US won't leave Afghanistan alone and has a strategy going beyond security, with in particular the illusion created by the "New silk road", which is a framework to promote trade in Central Asia in order to help it to stabilize.
Thus, TAPI was one of the topics that Turkmen officials were eager to speak about during the last Turkmenistan International Oil & Gas Exhibition (also known as OGT), which took place in Ashgabat between November 19th and 21st. This 18th OGT deceived many attendees. Most of the world majors and the big services companies sulked at the event. "OGT 2013 was a post Nabucco OGT [Nabucco was a European gas pipeline project that was abandoned this year, with its prolongation to Turkmenistan with a Trans Caspian pipeline]. The West doesn't expect anything soon from the Turkmens. That's why also ConocoPhillips, Statoil, Maersk, Mubadala or OMV closed their office in Ashgabat", says a specialist from the former Soviet area.
In other words, Turkmens put TAPI at the center of the discussions during OGT 2013 between optimism (after Obama's letter) and pessimism ("post Nabucco" year). Moreover, Ashgabat worries about its increasing dependency on China for its gas exports. "Beijing is more and more in a position to ask to review down the tariffs of the Turkmen gas it purchases", observes an energy expert who doesn't want to be named. Currently, China still requires a lot of gas to sustain its growth and needs to slow down its coal consumption, especially in power generation in line with anti-pollution policies. But as Russia doesn't buy more than 10 bcm a year of Turkmen gas now, and given the fact that Iran imports remain small, Ashgabat is dangerously relying on China to export its production.
Finally, the most noticeable event of this 18th Ashgabat Oil & Gas Exhibition was the signature of an agreement between the TAPI countries' state gas firms and the Asian Development Bank (ADB). ADB will advise them 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. That signature was presented as important. But it still leaves many skeptical about the possibility for TAPI to be built one day.
The market exists, in Pakistan and India. "Energy security is important for India and therefore the interest in TAPI is genuine in New Delhi. But it is not in India's hands alone to implement the project. Even the US which professes backing the project is unable to do much to advance the project except offer verbal encouragement", says for example Bhadrakumar Melkulangara, a former Indian ambassador in the region and expert on Central Asia geopolitics. Lynne Tracy, the US Deputy Assistant Secretary for South and Central Asia, told the OGT conference that, to make TAPI a success, "private sector participation is essential. What is missing is a commercial champion, an IOC [International Oil Company]. Without IOC involvement the project may not be financeable."
US companies Chevron and ExxonMobil have shown interest in the project despite the risks. But they reportedly have set a condition to consider taking on the job: getting access to Galkynysh or one of Turkmenistan's other big upstream projects that would supply a TAPI pipeline. But Turkmenistan rejects all proposals to bring IOCs – except CNPC – into its onshore upstream. Some say that a decision should be taken as soon as possible. A competitor project could move forward, as Tehran seems ready to compromise on the nuclear talks: the Iran – Pakistan (and eventually India) gas pipeline (IPI). Experts are also saying "never say never" on the IPI project.