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Desperateforgas
LathaJishnu
@ljishnu
|Tuesday15November2011
Rs4,500croreBawanapowerplantin
Delhiisviableonlyifitgetsgas
(Photo:VaibhavRaghunandan)

BAWANAINNORTHWESTDELHIisatellingstoponIndiaswindingandelusivegastrail.About
35kmfromthecitycentre,BawanaiswheretheDelhigovernmentissettingupa1,500MWpowerplant
thatwillmeetafifthofthecapitalsvoraciousenergyneeds.Thestateownedgeneratingcompany,
PragatiPowerCorporationLtd(PPCL),isforkingoutRs4,500croretosetupthisgasfiredplantintwo
modulesof750MWeach,thefirstofwhichhasbeenreadyforawhile.However,despiteseverepower
cutsinrecentweeks,theplanthasremainedidle.Thereisnofueltorunit
ThePPCLproject,whosesecondgasturbinewassynchronisedonFebruary9thisyear,isoneof14
powerprojectsthatdesperatelyneedsfuelsuppliestogoonline.Atotalof8,200MWofgasbased
generationcapacitywillnearcompletionbyMarch2012,accordingtotheCentralElectricityAuthority
(CEA),whichkeepstabsonprojectscountrywide.Althoughtheprivatesectoristhedominantpromoter
ofthegasbasedprojects,whichwilladdmuchneededmegawattstotheEleventhPlanpowertarget,
developerscaughtinthefueltrapincludepublicsectorundertakingsandstategovernments.
TheBawanaprojecthasbeenluckierthanmost,primarilybecauseitfeedsDelhi.Lettershavebeen
flowingthickandfastbetweentheSheilaDikshitgovernmentandtheMinistryofPetroleumandNatural
Gas(MoPNG),nottomentionthePrimeMinistersOffice,abouttheprecariousfutureoftheprojectifit
isdeniedgasfromRelianceIndustriesLimiteds(RILs)D6fieldintheoffshoreKrishnaGodavari(KG)
BasinatthegovernmentapprovedrateofUS$4.20permmBtu(millionBritishthermalunits).Parimal
Rai,principalsecretary,power,GovernmentoftheNationalCapitalTerritoryofDelhi,saysthe
economicsoftheprojectwouldgoforatossunlessitgetsthepromisedgasfromOilandNaturalGas
Corporation(ONGC)andKGD6(seePrecariouseconomicsofBawanapowerproject).Wecannot
sellpoweratareasonablerateunlesswegetKGD6gas,fretsRai,whoischairpersonofPPCL.

Theprojectneeds2.7millionstandardcubicmetresdaily(mmscmd)forthefirstmodule,about0.93
mmscmdhavingbeenpromisedfromD6.Hehasputworkonthe750MWBamnauliproject,forwhich
landhasbeenacquired,onholdtillthefogovergassuppliesclears.
Therearefertiliserprojects,too,thatwouldbelefthighanddry.AccordingtotheFertiliserAssociation
ofIndia(FAI),producershaveinvestedRs5,000croreforrampingupcapacitiesandforswitchingfrom
thecriminallyexpensivefueloilandnaphthafeedstocktogas.AnFAIofficialsaysastheworldssecond
largestconsumeroffertiliser,itisvitallyimportantforIndiatohaveassuredsuppliesofgasforthis
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industry,whichhasseennogreenfieldinvestmentsinthepast15years.

Victimsofthegasshortagearemany.Thereis,forinstance,citygasdistributorBhagyanagarGasLtd
(BGL)ofAndhraPradeshwhichhasbeenwaitingforsixmonthsforthetaptobeturned.SaysCA
Rashid,managingdirector,BGL:WehavebeenonthevergeofgettinggassuppliessinceAprilthis
year.RILcouldnotsupplyusthepromised0.1mmscmdfromitsKGD6.Itshopeswererenewedin
September.ThatwaswhentheBGLofficialhadvisitedpetroleumandnaturalgasministerSJaipal
Reddyandhadpersonallytakenaletterconfirmingsuppliesthroughaswapdealworkedoutbetween
GAILIndiaandRIL.BGL,ajointventurebetweenpublicsectorNavratnas,GAIL(India)andHindustan
PetroleumCorporation,hasbeensittingonidleassetsofRs150croresinceAprilapartfromincurringa
lossofaboutRs90lakhdailybecauseitsmainShamirpetgasstationinHyderabadcouldnotbe
commissioned,thecompanyclaims.

Thishashadaspirallingeffect.Citygasdistributiontypicallyincludes,inadditiontopipednaturalgasto
residences,commercialcomplexesandindustries,CNGforpublictransport(buses,taxisand
autorickshaws).Butthesectorisnotviableunlessadequatedomesticgasismadeavailabletoit(see
Citygastakesaknock).InHyderabad,theAndhraPradeshRoadTransportCorporationhasbeen
sufferinganothersetoflosseswitharound250busesinitsfleetconvertedtorunonCNGbutstuckfor
wantoffuel.

Whilecoalisthemostvillainousoffossilfuels,naturalgasisthecleanest.Itemits30percentless
carbondioxidethanoiland45percentlesscarbondioxidethancoal(seeReducingcarbonfootprint).
Inthecaseofpowergeneration,gasfiredcombinedcycleunitscanbeupto60percentenergyefficient,
whereascoalandoilgenerationunitsaretypically3035percentefficient.Thisisnottheonlyreason
thereisamadscrambleforthisfuelingasstarvedIndia.Itisalsocheaperandmoreefficienttouse,
especiallyinthefertiliserindustry.Thegovernmenthasplayedacrucialroleinallocatingitssupplyto
thecoreandnoncoresectorsinachangingorderofpriority,althoughhistoricallythefertiliserindustry
andthepowersectorhavebeengiventhebulkofthesupplies.Inadditiontothe2008gasutilisation
policy,whichtookawaytherightofproducerstosellgastocustomersoftheirchoice,theEmpowered
GroupofMinistershasperiodicallybeenchangingthelistofwhoshouldgetthefirstshotatgasafter
fertiliserandpower.Accordingly,citygasdistribution,LPGextractionandsectorssuchassteel,
petrochemicalsandrefineriesfiguredonthelistonlyafterthedemandsofthecoresectorweremet.

Thecurrentsituation,inwhichnaturalgashasbecomesynonymouswithasnowballingcrisis,isa
completeswingfromtheeuphoriaofplentyin20092010,whentheD6fieldwasgushing,pumpingin
increasinglylargeramountsofgasintotheeconomy.From10mmscmdinApril2009supplieshadshot
uptoover40mmscmdbyJune,makingitappearthattheoptimisticforecastsof2002,whenRIL
discoveredthebiggestnaturalgasreservesinthecountry,wereindeedontrack.Thecompanyhadsaid
thenthatgassupplieswouldthereaftertouch80mmscmd.

ButhopesofIndiaswitchinglargelytoacleanerfossilfuelhavedippeddramaticallyinthepastyearas
RIL,firstcaughtinbitterlegaldisputesoverpricingandcontracts,hastaperedoffitsproductionfrom60
mmscmdto46mmscmd.Till2009,mostofthegaswasproducedbythestateownedbehemoth,ONGC.
Butin200910,whenthetotalproductiontouched46.5billioncubicmetres(bcm),itaccountedforonly
23.1bcm,whileRILproducedasmuchas14.4bcm.Apartfromthescabrouscourtcasebetweenthe
AmbanibrothersthatpittedRILagainstRelianceNaturalResourcesLtdforfouryearsstartingin2006
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andalsoinvolvedthepublicsectorundertakingNTPC,thecountryslargestpowergenerator,therehave
beenothercontroversies.ThemostseriouswaskickedoffwhentheComptrollerandAuditorGeneralof
India(CAG)raisedquestionsaboutRILshighcapitalexpenditureinD6andwhatittermedthe
capitulationofthedownstreamregulator,theDirectorGeneralofHydrocarbons(DGH),tothe
companysterms.Allofthishasdonelittletobringanyclaritytothesituation.

Sofar,RILhasrefusedtosaywhenproductionwillberampedup.Althoughithashintedattechnical
glitchesdropinreservoirpressureandwateringressDGHhasblameditfornotdrillinganadequate
numberofwells.RILhasnotrespondedtoDownToEarthsquestionseither.However,itspartnerBP,
whichhaspickeda30percentstakein23ofitsoilandgasfieldsforUS$7.2billion,hasstatedpublicly
thatitwilltaketill2014tojackupproduction.AttheSeptember28pressbriefing,BPchiefRobert
DudleydescribedD6asaworldclassresourcebutalsosaiditwasacomplexreservoirthatcalled
forhightechnology.Youaretryingtoimaginedownmilesunderthesea,(but)itisnotquiteasyou
expect.Youfindsomesurprises.SothefieldhasdeclinedandourteamsandRelianceteamsareworking
onthat,hesaid.

ThepopulartheorydoingtheroundsisthatRILisnotkeentojackupproductiontill2014whentheprice
ofgasfromKGD6comesupforreview.Inapricediscoveryexerciseitconductedin2007,thecompany
hadwanteditsD6gasfixedat$4.5permmBtuandthegovernmenthadapproveditwithaslight
modificationto$4.205permmBtuduringthefirstfiveyearsofproduction.Dudleysstatementand
indicationsfromRILhavetendedtoreinforcethisperception.

Whateverthereasonsfortheshortfall,nooneisoptimisticabouttheprospectsofgasintheshortterm.
BleakistherefraintobeheardbothinMoPNGandintheMinistryofPower.Whereisthegas,asksan
officialfromMoPNG,respondingtofrequentpetitionssentoutbytheDelhibasedAssociationofPower
Producersonprojectsleftinthelurch.Ironically,theuncertaintycomesatatimewhentheIndianmarket
isbeingviewedasoneofthefastestgrowingintheworld.TheInternationalEnergyAgency(IEA),an
autonomousinstitution,saysthepotentialforgrowthistremendousbutpricingwouldbeakeyfactorin
pushingupconsumptionfigures.Indiaisanextremelypricesensitivemarketbecausetheabilityof
customerstopayvarieswidely.Fertiliserproducersaresubsidisedbythegovernmentthecurrentyears
subsidyisestimatedatRs70,000croreandhaveverylittleleewayinabsorbinghigherprices.The
powerproducershavetokeepinmindwhatthemarketcanbearsincegashastocompetewithcoalfor
baseloadgeneration.

RaiofPragatiPowerexplainsthehugedifferenceinthecostofpowerbasedondifferentsourcesofgas:
TheBawanaprojectbecomesunviableif,insteadofthegovernmentapprovedrateof$4.2permmBtu,
ithastobuyspotLNGat$1216andregassifyit.Inthiscase,theunitcostofpoweralmostdoublesto
Rs8.Therewillbenotakers.Therehastobeaparadigmshiftinthegovernmentsapproachtoutilising
gasforthepowersector,saysAshokKhurana,directorgeneraloftheAssociationofPowerProducers.
Ifthegovernmentseesgasasbenignfuelthatreducesthecarbonfootprintitneedstositdownand
decideonpoolingofprices.Moreimportant,italsoneedstofreeupthemarketforpowergeneratorsas
laiddownintheElectricityAct.Hiscontentionisthatgasfiredthermalplantsofferarangeofbenefits
apartfromtheenvironmentalincentivestopowerstarvedIndia:fasterresponsetimetovaryingload,
cheapertosetupbecauseprojectscomeupfasterandadiversificationoftheenergysecurityrisks.

Butoneofthekeydemandsoftheassociation,poolingofgasprices,has
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alreadybeenrejectedbyagovernmentappointedpaneltolookintothe
Popularbeliefis
issue.Thepanel,headedbyPlanningCommissionmemberSaumitra
thatRILisnot
Chaudhari,saidinareportsubmittedendAugustthatdomesticnatural
keentojackup
gasusersshouldnotbeforcedtosubsidisecostlierliquefiednaturalgas
productiontill

(LNG).Itdidnotrecommendapoolingmechanismattheoveralllevel

2014whenthe
oronasectoralbasis.
priceofgasfrom
Itsaidpreferentialallotmentofdomesticgasshouldonlybeforpriority
itsD6fieldwillbe
sectors,suchasfertilisersandpower,andotherconsumerssuchassteel
dueforreview

plantsbeallocatedimportedLNG.Whiledomesticgasiscurrently
pricedbetween$4.2and$5.5permmBtu,LNG,importedinships,costs
$12to$16permmBtu.Thenonpriorityusersoperateinamarketenvironmentwheretheiroutput
pricesaremarketdrivenwithnoregulatoryburdenandhencetheyshouldbeabletopassonthehigher
costsofgasfeedstock,itsaid.

Whatthenistheoutlookforgasconsumersinthecountry?Cheapergasthatcouldhavebeenbroughtby
crossborderpipelinesisprovingtobeamirage(seeThepipelinemirage)andevenlongtermLNG
contractswillnowbesteeplyhigherthanthecurrent$3.125.5mmBtu.Thecountrycurrentlyimports
around7.5milliontonnesannuallyunderlongtermagreementssignedwithQatar.
Whatisclearisthatalthoughlatentdemanddoesexistfromtheunregulatedsectors,consumptionwill
dependongasbeingavailableatreasonableprice.AccordingtoananalysisbyEdelweissSecurities,gas
consumptionbetween2011and2014willbesuppressedandgrowatcompoundannualrateoffourper
centagainsttheexpectedGDPgrowthofseveneightpercent.Unsurprisingly,consumptionbythe
fertiliserandpowersectorswillbelargelylimitedtoindigenoussupply,whilemostoftheincremental
LNGsupplywillbetakenupbycitygasdistributorsandindustrialconsumers.
Thegasbubble,itappears,willlastforquiteawhile.

Citygastakesaknock

Uncertainityovergasavailabilityhasputaquestionmarkoverthefutureofthecitydistribution
programme

CITYGASHASBEENthebiggestcasualtyofthelongdrawncontroversyoverthefunctioningpowers
oftheupstreamregulator,thePetroleumandNaturalGasRegulatoryBoard(PNGRB).Ithasbeen
draggedtocourtonseveralissues,oneofthemontheabrogationofthepowersofmembersbythe
chairperson.Thelegalwranglehasstalledplanstohaveacitygasdistribution(CGD)networkacrossthe
country.
Insteadoftheambitioustargetofcovering86townsandcitieswithapopulationof100millionby2011,
theboardhasbeenabletoawardbidstojusthalfadozennewareasinadditiontoformalisingexisting
authorisations.Theboardshopeofextendingthenetworkto120citiesby2013seemsasfarfetchedas
gettinganallocationof30mmscmd(millionstandardcubicmetresdaily)forfuellingthisexpansion.
Now,althoughtheboardspowersofauthorisationarenolongerindoubtthegovernmenthasnotified
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themissingSection16inthePNGRBActinJuly2010,nearlythreeyearsaftertheregulatorwassetup
uncertainityovergasavailabilityhasputalargerquestionmarkoverthefutureofCGD.

TheunderlyingproblemwithCGDisthatunlikeintheWest,citygasinIndiaincludescompressed
naturalgas(CNG)forpublictransportalongwithpipednaturalgas(PNG)forhomes,commercial
establishmentsandindustry.Inhomes,PNGisprimarilyforcookingunlike,say,intheUSwhere26per
centofthegasisusedforhomeheating.Accordingtoindustrysources,lessthanonepercentofthegas
isconsumedforheating(torungeysers).AndPNGbusinessissuchthatunlessacompanyrunningacity
networkhasadequatecommercialandindustrialconsumersthenetworkcouldrunintoheavylosses.
Hereliestherub:withsuppliesofAPMoradministeredpricemechanismgas,whichretailsatlowrates,
runningoutforCGD,thecostsaremounting.

IndraprasthaGasLtd,whichrunsthenetworkinDelhiandneighbouringNoida,GreaterNoidaand
Ghaziabad,andhassignedupfor0.308mmscmdofgasfromRelianceIndustriesKGD6,isgettingjust
0.1mmscmd,forcingittobuymoreimportedLNG(0.3mmscmd),which,thecompanysays,itisbuying
atUS$1617permmBtu(millionBritishthermalunits).Asaconsequence,therehavebeenpricehikes
bycompaniessuchasGujaratGasandIndraprasthaGas.

Households,althoughlargerinnumberthanindustrialconsumers,paymuchlowerrates.Thedomestic
sectorentailsahigherinvestmentbecauseitrequiresaninfrastructureofdensepipelines.CGDpricing
worksonlyifitisbenchmarkedtothefuelthatitissubstituting.Inotherwords,domesticconsumers
whoswitchfromLPGcylinderstoPNGwillexpectacommensuratedropinthetariff,justasvehicles
movingfromdieselandpetroltoCNGneedanincentive.Thepremiumthatindustryiswillingtopayto
switchfromexpensivenaphtha,dieselandfueloiltopipedgas,however,ismuchlarge,andthat
providesthecreamforCGDoperators.

PNG,accordingtoanindustryestimate,costsalmostRs15,000perconnection.WithbillingofRs1,500
2,000percustomerperyear,thepaybackperiodistoolong.Notalltheresidentsinacolonyswitchto
PNGdespiteitseconomics.Withanaverage30percenthouseholdsswitchingtoPNG,theeconomics
workagainstCGDoperatorsunlessCNGsubsidisesPNG.CGDoperatorscomplainthatotherpolicy
formulationsworkagainsttheCNGprogrammeonesuchbeingthehighsubsidyonLPGcylinders
whichforcesoperatorstokeepPNGpricesartificiallylow.

Giventhisperspective,somelikeRajeshVedvyas,managingdirector,IndraprasthaGas,foreseeableak
futureforCGDunlessthereareincentivesinfuturetomakeitaviablebusiness.Vedvyaspointisthat
CNGisbeingpushedbecauseofaSupremeCourtdirectivebasedonenvironmentalconcerns.Infuture,
policymakerswillhavetomakeitclearthatCNGisthefuelofchoiceforcitiesandthatgovernmentis
preparedtoofferincentivestopopulariseit.

CNGprogrammeshavebeensuccessfulinDelhiandMumbaiforthesimplereasonthatapartfrom
regulationsmandatingCNGusageinpublictransport,thereisahugepricedifferencebetweenCNGand
petrolordiesel.Insmallercitieswheresuchregulationisinplace,itsexecutionisdisappointingbecause
ofthenegligibledifference(seeRegularmotorfuelsvnaturalgas).Thiscombinedwiththelow
averagerunofvehicleandthehighconversioncostmakesaswitchtoCNGlessthanattractive.

Besides,thepublictransportfleetisnotasbigasinDelhiandMumbaiandcannotensuretheanchor
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volumewhichcanmakethebusinesssustainable.

Vedvyas,infact,suggestsdrasticmeasuressuchasabanonprivatedieselvehiclestocopewiththe
challenge.That,however,issomethingpoliticalpartiesmaynothavestomachfor,speciallysince
environmentfriendlyalternativesareavailable,likeultralowsulphurdieselandHSdieselthatis
compatiblewithEuroIVnorms.Assuch,CNGbusinesscannotbepushedmerelyontheenvironment
friendlyplank.

Butthebottomline,ofcourse,isthegasprice.CGD,accordingtosomeexperts,canrunonlycheaper
domesticgasalargecomponentofregassifiedLNG(RLNG)wouldbeunviable.However,other
analystspointoutthatthisisapriceelasticmarketwithhugelatentdemand.Atleastonestate,Gujarat,
whichcallsitselfagasbasedeconomy,ispreparingforthenewreality.OnSeptember29,theGujarat
StatePetroleumCorporation(GSPC)enteredintoapreliminaryagreementwithBGIndia,subsidiaryof
theglobalnaturalgascompany,theBGGroup,forthelongtermsupplyofupto2.5milliontonnesper
annum(mtpa)ofliquefiednaturalgas(LNG).Nopriceswereindicatedforthedealwhichisexpectedto
helpGSPCbridgethewideningdemandsupplydeficit.BGIndiaproposestoselltheLNGvolumesto
GSPCforupto20years,beginningearly2014.

Thepipelinemirage

Indiawithdrewfromoneprojectandtheotherhasbeenpendingforadecade

USSECRETARYOFSTATEHillaryClintoncallsittheNewSilkRoute,romanticisingwhatmust
surelybeoneofthetoughestcommercialdealsforanygroupofnationstopulloff.Thestarinthisclutch
ofroads,railwaysandotherinfrastructurethatUSispushingistheTurkmenistanAfghanistanPakistan
IndiagaspipelinebetterknownbyitspertacronymTAPIthatgroupsthecountriesinvolvedinthis
undertaking.Thepipeline,allof1,680kmlong,willsnakeitswayfromtheDaulatabadgasfieldsinthe
centralAsiancountry,takeinHerat,KandaharinAfghanistanandMultaninPakistanbeforereaching
FazilkaontheIndiansideofPunjab.
ItisbetterknownintheWestastheTransAfghanPipelinebecauseclosetohalfitslength(830km)lies
inwartornAfghanistanjust170kmofthisaudaciousventurewilllieinTurkmenistan.Anequallylong
stretchspansPakistan,makingitoneoftheriskiestventuresforacountrythatisseekingtoensureits
energysecurity.ItistheUS$7.6billionTAPIthatIndiaisnowpursuinginseemingearnestafteryearsof
scepticismabouttheproject.Itwasin2008thatittookthetentativefirststepontheTurkmenistangas
optionafterturningitsbackontheIranPakistanIndia(IPI)pipelineindeferencetotheUS,whichhad
frowneduponDelhiwarminguptoTehran.ThatwasintherunuptoIndoUSciviliannuclear
agreement.

TwofactorsappeartohavenudgedIndiafurtherontheTAPIroute.OnOctober11,auditorsreleasedin
AshgabattheirsecondroundoffindingsonthegasreservesinTurkmenistan,confirmingthattheCentral
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Asianrepublicissittingonevenlargergasreservesthanpreviouslythought.Britishoilconsultancy
GaffneyCline&Associates(GCA)hasassessedtheSouthYolotanandOsmandepositsat21.2trillion
cubicmetresofgasonthehighestimate,13.1trilliononthelowestimateand16.4trillioncubicmeters
onthebestestimateorthemostlikelywithinthegivenrange.Thishassetatrestearlierfearsthatthe
countryhadovercommitteditsgas,havingsignedmajordealswithChina,RussiaandIran.

Thesecondfactoristhatitsotherpipelineoption,theIPIlinkis
TAPIpipelinethat
practicallyhistoryafteritwithdrewfromtheprojectallowingIranand
Indiaispursuingin Pakistantopursueabilateralagreement.Inhisjustreleasedbook,
earnestforenergy
EnergyandSecurityinSouthAsiaCooperationorConflict?,CharlesK
Ebinger,directoroftheenergysecurityinitiativeattheBrookings
securityruns
througha
Institution,analysesthemanypipelinesthathavebeenproposedtoease
thesubcontinentsfossilfuelhungerTAPI,IP,OmanIndiasubsea
politicallyvolatile
pipelineandtheMyanmarBangladeshIndiapipelineandsaysthat
regionspanning
althoughtheseprojectspromiseenergysecurity,eachoftheseisplagued
Afghanistanand
withpolitical,economicorsecurityobstaclesthathaveprevented
Pakistan
tangibleprogress.

WhetherTAPIwillultimatelyturnouttobethegasjackpotishardto
sayatthisstage.Turkmenistancurrentlyextractsanestimated4045billioncubicmetres(bcm)ofgas
annually,asharpdropfromsome70bcmannuallyaboutthreeyearsago.

Theoiladvisorywasmadepublicjustbeforelowkeytalkswereheldamongthepetroleumministersof
thepartnercountriesinDelhiwhen,accordingtosourcesintheMinistryofExternalAffairs(MEA),an
agreementhadbeenreachedonthecontentiousissueofprice.Nodetailswereavailableanditwasnot
certainifadatehadbeenfixedforsigningGasSalesPurchaseAgreement(GSPA).InDecemberlast
year,thefourcountrieshadsignedanintergovernmentalframeworkagreement,thebasicdocumentfor
gettingtheprojectofftheground,inAshgabat.

Yetforallthat,thereisstillastrongfeelinginsomesectionsofMEAthatIndiaistakingtoomuchofa
gambleinpursuinggasfromTurkmenistan.CanIndiaplaceitsenergybetsonapipelinerunningthrough
thevolatileregionsofAfghanistanandPakistan?Orwilltherewardsjustifytherisks?Thereisafeeling
thathavinglosttoChinaontheMyanmar,Kazakhstan,IranandevenTurkmenistanpipelines,India
needstogetitspipelineacttogethertotieuplongtermgaspipelinesasdemandforthisscarcefuel
entersanewtrajectory.IftheTAPIpipelinedoescomethroughitsbeenpendingforadecadeitwill
deliver30billioncubicmetresofgasannuallytoconsumersinthethreecountries.

Butaccordingtosecurityanalysts,thebigworryisthevolatilenatureofinternationalpoliticsinboth
AfghanistanandPakistan.WasIPIabetterbet?Accordingtoallaccounts,itwasthepricingissueon
whichtheIrangasventurefloundered.AtthetimethetalksbrokeoffIranwasseekingadeliveredprice
(transitfeestoPakistanincluded)ofclosetoUS$7mmBtu,almost$2.50morethanIndiawaswillingto
payandapricethatwashigherthantheprevailingspotLNGrates.Thoserateshavenowmovedtothe
$1217mmBturange.

China,ontheotherhand,hasmanageditsriskswithelan,playingthe
Havinglostto
GreatGameasonlythePeoplesRepubliccan.InDecember2009,
Chinaonseveral
ChinaandTurkmenistanformallyopenedthelongestnaturalgas
deals,Indianeeds
pipelineintheworld,adevelopmentthatreflectedthefutureofenergy
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flowsinEastAsia.Theprojectentailstwopipelinesandmultiple
suppliers.Thefirsttraverses1,833kmfromTurkmenistanthrough
UzbekistantosouthernKazakhstanandthenXinjianginChina.From
therethepipelineconnectstoChinasdomesticpipelinenetwork,
ultimatelystretchingto7,000km.ThisyeartheUzbekistanand
Kazakhstangasalsobegantoflowthroughthesecondline,also1,833
kmlong,enablingChinatogetgasfromallthreeCentralAsian
producers.TheTurkmenistanChinapipelinewasnegotiated,signedand
builtwithinthreeyears.

Suchisthegeopoliticsofoil.Nothingventured,nothinggained.

togetitsact
togethertotieup

longtermgas
pipelinesas
demandforthis
scarcefuelentersa
newtrajectory

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