The inability of 20th steering committee meeting of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project to select a consortium leader during its February 11, 2015 deliberations in Islamabad has raised renewed concerns about the mega-project’s prospects. It also highlights the continued questions over India’s capacity to become a major power in Eurasia. With Russian and Chinese firms now being considered as candidates along with France’s Total S.A. for consortium leader, India’s efforts to improve its geostrategic position in Eurasia’s Central Asian heartland may be about to receive a significant setback.
The TAPI pipeline is slated to transport 33 billion cubic meters (bcm) of natural gas from Turkmenistan’s Galkynysh field, the world’s second largest natural gas deposit, to the neighboring South Asian region, helping to provide stability to energy-starved Afghanistan and Pakistan as well as helping to meet the Indian economy’s own skyrocketing demand. TAPI will provide Afghanistan with 0.5 billion cubic feet per day (bcfd) of natural gas, while India and Pakistan will each receive 1.365 bcfd. However, the $10 billion “Peace Pipeline” designed to promote regional cooperation will have to traverse a dangerous route before reaching India, passing through Afghanistan’s Kandahar province and the neighboring Quetta region of Pakistan, traditionally the heartland of Taliban militancy.
Because of the risk involved, progress on TAPI has stalled. The Asian Development Bank (ADB), which assumed the role of transaction advisor to facilitate the construction of the pipeline, estimates that the delays have raised the cost of the project by $2.5 billion to its current $10 billion price tag. In October 2014, the ADB commissioned a feasibility study for the TAPI pipeline project as part of its effort to establish a consortium that would construct the pipeline by 2018. At the previous TAPI Steering Committee meeting held in November 2014 in Turkmenistan’s capital Ashgabat, representatives from the four nations and the ADB agreed to an accelerated timetable for completion of the pipeline. Pending selection of a consortium leader, construction could begin in 2015 and the pipeline could be operational by 2018.
The selection of a consortium leader has proved problematic. U.S. oil majors Chevron and Exxon Mobil initially expressed interest in the role. However, owing to Turkmenistan law, which precludes the private ownership of land, both companies withdrew from consideration after Asghabat’s refusal to issue an equity stake in the Galkynysh field in exchange for assuming the risk of construction.
Total S.A., after Chevron and ExxonMobil’s withdrawal, was considered the leading candidate. The French energy giant may be willing to take the lead in constructing the pipeline in exchange for a modified Technical Services Contract (TSC) that would give Total the right of first refusal over the gas extracted from Galkynysh. In this manner, the Turkmenistan government would retain ownership of the land while Total would possess a sufficient profit share in the gas to warrant its assumption of the risk of the pipeline construction.
According to news reports coming from Pakistan and Afghanistan, the TAPI principals will select a consortium leader at the next TAPI summit to be held in the Afghan capital Kabul on March 15. In addition to Total, Russia’s Rostec and the China National Petroleum Company (CNPC) are also being considered. The candidacies of Rostec and particularly CNPC are alarming developments for India. In December 2014, Rostec was awarded the contract to build Pakistan’s gas infrastructure following the November signing of the first military cooperation agreement between Moscow and Islamabad.
In the most significant blow dealt to India’s “Connect Central Asia” policy, Beijing thwarted New Delhi’s attempt to develop a foothold in Central Asian energy by acquiring ConcoPhillips’ 8.4 percent share in Kazakhstan’s massive Kashagan oil field. Although Kazakhstan previously gave indications that it would approve the $5 billion sale of ConocoPhillips’s share to India’s OVL, the Kazakhstani government blocked the transaction and bought ConocoPhillip’s stake in July 2013. Kazakhstan then turned around in September 2013 and sold an 8.33 percent stake in Kashagan to CNPC for an equivalent $5 billion along with CNPC’s agreement to provide $3 billion to cover half the cost of Kashagan’s phase two development. Similarly, Turkmenistan’s Galkynysh natural gas field itself was developed by a CNPC-led consortium and CNPC will be the sole service contractor for Galkynysh’s second development phase. If CNPC is selected to be the consortium leader, instead of expanding India’s influence in Central Asia, the TAPI pipeline could provide China with undue influence over India’s natural gas supply.
For its part, Turkmenistan itself also may now be reluctant to see CNPC become the TAPI consortium leader. The evolution of Turkmenistan’s energy relations with China was influenced by Ashgabat’s concern about protecting its strategic assets in the Caspian from Moscow and Tehran. Turkmenistan’s current president Gurbanguly Berdimuhamedov has changed course from his predecessor’s strict neutrality and has been developing security relations with the U.S., NATO, and Israel. However, with Russia having slashed its gas imports from Turkmenistan by 80 percent, China has become the only major market for Turkmenistan’s natural gas. The TAPI pipeline would go a long way to alleviating Turkmenistan’s desperate need to diversify its export markets. While Turkmenistan now exports 35 bcm annually to China, the revenues that Ashgabat earns are offset by the debt it owes CNPC for building the China-Turkmenistan pipeline. Developing a dangerously high level of economic dependence on China, Turkmenistan would be ill-advised to allow CNPC to become the consortium leader for the construction of the TAPI pipeline.
Building on the elevation of India-U.S. strategic cooperation agreed upon during the January 2015 meetings between President Barack Obama and Indian Prime Minister Narendra Modi in New Dehli, India needs to secure its strategic interests in Central Asia by asserting its influence over the selection of the TAPI consortium. While India can turn to costlier sea-borne LNG imports to meet its energy needs, New Delhi’s failure to ensure the construction of the TAPI pipeline on favorable terms may find India further marginalized in Central Asia, a region critical for India’s security as well as its energy and trade needs. It is an outcome India can ill afford. Instead of realizing its ambitions to play a greater role on the world stage, India could find itself on the sidelines of the new Eurasia.
Micha’el Tanchum is a fellow in the Asia Unit of Hebrew University’s Truman Research Institute for the Advancement of Peace. He also teaches in the Department East Asian Studies and the Faculty of Law at Tel Aviv University.