Turkmen Gas Not to Reach India Before 2020
First gas from Turkmenistan via the TAPI pipeline is not expected to reach India before 2020, India Ratings and Research (Ind-Ra), a Fitch Group company, said in a note Thursday.
The TAPI pipeline is unlikely to be commissioned by the proposed timeline of FY18, and India will continue to rely on domestic gas and imported LNG, the agency said.
The agency sees four key issues associated with the successful commissioning of the pipeline a) the seller’s willingness to sell gas at a price feasible for the ultimate buyer b) volume off-take assurance by end-consumers c) funding of the pipeline and d) geopolitical risks associated with the construction and operation of the 1,735km long pipeline.
The willingness of Turkmenistan state concern to price its gas in a manner which would ensure its cost competitiveness in countries where the gas is finally sold is essential for the project to take off, the agency stated adding that the Central Asian nation is a net exporter of natural gas and its economy depends on such exports and hence may keep prices high.
Additionally, the extractability of the proven reserves of 16 trillion cubic meters of gas from the South Yolotan-Osman field from where the gas would be supplied could pose a challenge which could limit the quantum of gas available for transportation from the pipeline, Ind-Ra said.
The agency stated that many user industries would find the gas unviable for their operations and may refrain from entering into long-term purchase agreements if the landed price of gas in India from the pipeline were to be high at $10/mmbtu-$12/mmbtu. Additionally, operations of gas-based power plants and fertiliser plants using gas from TAPI (2x domestic gas price) would lead to high power tariffs and higher subsidy, respectively, which the government might not prefer. Transit fee payable to each nation from where the pipeline passes and funding tie-ups for the project could hinder the prospects given the geo-political risks and the lack of off-take agreements. Financial closure for the project would involve significant support from participating countries including equity participation and guarantees for the project debt. This is because the construction and operation of the pipeline, which will pass through difficult and conflict-affected geographies in three countries, carry major credit risks.
The pipeline will be a boost for energy starved India. However, its commissioning faces multiple challenges which are unlikely to be addressed quickly and will make it a long gestation project, the agency concluded.