TAPI Nations to Ink GSPA Deal
Pakistan's Economic Coordination Committee (ECC) of the Cabinet has been informed that the participating countries in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project would sign the general sale purchase agreement (GSPA) on Monday, Business Recorder reported Saturday.
There is yet no agreement on the transit fee between Afghanistan, Pakistan and India.
Sources said that the gas price formula approved by the ECC was based on base price, agreed risk sharing formula and gas price review mechanism. The gas price formula agreed with Turkmenistan was common for all buyers (Pakistan, India and Turkmenistan) in structure and only difference was the base price, which is different for all three buyers.
The formula included a basket of fuels (Platts Oilgram Singapore Market) i.e. HSFO 380 cst, HSFO 180 cst and Gasoil to be used for indexation of the gas price.
The agreed base price is 55% of Brent oil parity (at Brent price US$ 100/Bbl) and comes to 70% of Brent Oil Parity (at Brent price $100/barrel) in mid country - Multan delivered. The meeting was also presented a comparison of Multan Delivered prices of alternative fuels including HSFO, Gasoil, IP, RLNG and Tapi gas price demonstrating the economics of Tapi price vis-à-vis other fuels. An official said that complete cost of the project originally estimated at $3.3 billion in 2004 escalated to $7.6 billion in 2008. The ECC was informed that around four to five years would be required to complete the project after GSPA signing.
The ECC was also informed that in view of different calculations of transportation and transit fee costs via the Afghan territory, Pakistan and Turkmenistan agreed to share the risk with a floor and ceiling of transportation and transit costs through Afghan territory.
It was agreed, the ECC was informed, under Intergovernmental Agreement (IGA) and Gas Pipeline Framework Agreement (GPFA) signed on December, 11 2010, that Pakistan and India would negotiate and agree on transit fee with Afghanistan for their respective volumes. India would also negotiate and agree on transit fee with Pakistan as well as on flow of Indian volume through Pakistan territory.
Minister for Water and Power Syed Naveed Qamar, heading a sub-committee of the ECC, submitted a report showing that Pakistan had held bilateral negotiations with India and Afghanistan.
Pakistan-India-Afghanistan also held two trilateral meetings on the matter, the latest one held on February 23, 2012 on sidelines of Tapi 16 TWG meeting, The ECC was further informed. The Indian and Afghan positions were tendered during the meeting.
The sub-committee was also briefed that though the transit fee matter was standalone from GSPA. However, TAPI parties had agreed to finalise the matter by April 20 this year. The sub-committee was also briefed that the Tapi parties had agreed that a suitable indexation mechanism would be incorporated in the transit fee agreement. The same was endorsed by the sub-committee.
The Secretary Economic Affairs Division remarked that the transit figures, being negotiated between India and Afghanistan, were quite reasonable. It was briefed that while the transit fee was a zero sum for Pakistan and whatever transit fee number was agreed would serve as a benchmark for future gas agreements for Pakistan. Furthermore, in terms of value, higher transit fee would be beneficial for Pakistan.
The sub-committee later approved the basis of the transit fee and negotiation of TAPI transit fee alongwith a suitable indexation mechanism.