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    Turkmenistan, and what its Gas Means for Afghanistan

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Summary

Afghanistan plays a key role In the Turkmenistan–Afghanistan–Pakistan–India Pipeline project. Turkmenistan has the world’s fifth largest reserves, as of 2015

by: Kamil Sobczak

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Turkmenistan, and what its Gas Means for Afghanistan

Afghanistan plays a key role In the Turkmenistan–Afghanistan–Pakistan–India Pipeline project. Turkmenistan has the world’s fifth largest reserves, as ranked in 2015[1]. This strong position offers considerable advantages with respect to defining the strategy of natural gas export policy. Turkmenistan, on the other hand, shows that there are no benefits in having such rich natural resources if the country cannot export them. Particularly as Turkmenistan produces 69.3bn m³/yr and consumes 27.7bn m³/yr.[2]

Afghan-Turkmen cooperation is an interesting example in the context of gas projects; and it reveals current geopolitical tendencies in central Asia. Russia has lost its importance in gas projects in the area. The biggest loss of influence was the result of the Afghan war in 1979-1989. One of the consequences is exclusion from current gas projects in central Asia but more influence for the US, which will be responsible for the safety of the Afghan section of TAPI.

Of course, it doesn’t mean that Russia has no influence on central Asia’s energy policy. Its participation, although less insignificant than during Afghanistan – USSR cooperation, is mainly focused on bringing gas from this area to Europe, using alternative ways.

The Afghan gas sector owes its rapid development and fall to the Soviet Union. Afghanistan has been exploring its natural resources since 1936 but the boom began in 1957. Technological assistance and reservoir experience was provided by the former Soviet Union. As a result, eight test drillings have been carried out. They explored three rich deposits of natural gas. Most of the resources were found in the north of the country, in Jowzjan Province whose capital is Sheberghan.

The Department of Natural Gas Transmission was established in the late 50s at the Ministry of Mines and Petroleum. In the 1960s Afghan government set up oil and gas exploration agencies. Most of the gas was exported to the USSR, however it was also used for internal use such as power-stations and textile factories in Mazar-e-Sharif. The Soviet invasion of Afghanistan caused a dramatic fall in natural gas extraction. The situation did not change either during the civil war, or during the Taliban rule. The American invasion removed the Taliban from power, which again caused an increase in gas exploration. Today, daily production is about 450 000 m³, most of which supplies domestic industry[3].

TAPI is a gas pipeline project that is intended to transfer gas from the Turkmen Galkynysh gas field through Afghanistan and Pakistan to India. The pipeline is planned to be 1800 km long with a transit capacity of 33bn m³/yr. The contract was signed December 15 with a 30-yr duration. The expected cost of the project is $10bn, 85% of which is to be covered by Turkmenistan.

The contract signing ceremony took place in Mary, southeast Turkmenistan, with the participation of president of Afghanistan Ashraf Ghani, president of Turkmenistan Gurbanguly Berdymukhamedov, the prime minister of Pakistan Nawaz Sharif, and vice president of India Muhammad Hamid Ansari.

TAPI keeps gas out of Russia's markets

The pipeline project is due to be built by December 2019, the undertaking is executed by the consortium of corporations such as Afghan Gas Enterprise, Inter State Gas Systems (Pakistan), GAIL (India), and Turkmengas which performs the leading role. There are also talks being held over adding DragonOil, a company controlled by the United Arab Emirates. Thanks to this project, Turkmenistan will be able to sell gas to India without stepping on Russia's toes, unlike sales to Europe.

The project, however, is fraught with danger. Afghanistan and Pakistan are not considered safe when it comes to long-term investments. The pipeline will cross Herat, Farah, Helmand and Kandahar provinces. The authorities of Helmand province warn of considerable safety breaches[4].

The project is important for the US whose plan is to separate Turkmenistan and central Asia from the dominant influence of Russia and China, and so they are trying to protect the project in the areas of Afghanistan and Pakistan. The Iran-Pakistan-India (Iranian pipeline) is a parallel project that is supposed to transmit a daily amount of 25bn m³/yr to Pakistan. However, under pressure from the US, India is not co-operating fully with Iran[5].

US companies to the fore

 

Overall it can be said that American institutions play a dominant role in gas projects undertaken in Afghanistan. There are five major financial players – United States Agency for International Development (USAID), Asia Development Bank, The World Bank, US Department of Defense and International Security Assistance Force – involved in Afghanistan's energy projects and of those, four are controlled by the US[6].

The support of the US is crucial for the project as it serves as a certain guarantee for the undertaking. The question is: what does America expect in return? Turkmenistan itself has common ventures with Afghanistan, such as selling electricity to Afghanistan and developing a railway system, which proves the Turkmen experience in the field.

The CASA project (on electricity transmission) is, on the other hand, an example of the importance of Afghanistan as an intermediary between Central and South Asia (750 km of the line will cross through Afghanistan). The CASA project is, once again, an example of not including Russia in this type of enterprise, which shows how limited its impact is.

The CASA 1000 project is financed by the World Bank, US Agency for International Development (USAID), US State Department, the United Kingdom Department for International Development (DFID), Australian Agency for International Development (AusAID) and The Islamic Development Bank[7].

TAPI is in direct competition not only to the Iranian IPI project, but also to LNG exporters, among which are such countries as Qatar, Australia, USA, Canada and Russia, together they export an estimated 30bn m³/yr to India[8].

TAPI is going to cross Afghanistan and Pakistan and that poses a risk that Ashgabat need to take into consideration. In 2014 in the report of the International Energy Agency The Asia Quest for LNG in a Globalising Market, the pipeline project from Turkmenistan was defined as a distant possibility only to materialise one year later as a result of signing the contract between the countries interested in the TAPI project. It may be stated that Turkmenistan has chosen, from among the options for exporting gas, pipeline construction that does not interfere with Russian interests and enjoys US support.

The pipeline may be a significant source of revenue for Afghanistan. According to the Rafiullah Nazi, the head of the Afghanistan Regional Studies Centre, transiting gas across the 735 km of its territory could earn the country $400mn/year (other sources show the numbers of 300 and 500 milion – from the author)[9].

The income is going to increase the state budget, affect the decrease of shortage and gas purchase (however, the last issue is rather a theoretical possibility)[10], as well as the income resulting from jobs which number, only in terms of the project security, estimates around 7000. Already 4000 people have been hired to this end[11]. Profits from the pipeline construction will allow other countries to reduce their aid and boost the domestic market.

It is worth mentioning that, apart from financial benefits, Afghanistan is establishing itself as a transit country, and thereby becoming safer of course only while the pipeline is allowed to operate. The above mentioned arguments show the advantages resulting from the pipeline project in Afghanistan.

However, there is also the possibility of failure. Safety issues in Afghanistan, relations between Pakistan and India, lack of full agreement on the price and financing issues of the project are posing a real threat to construct it. There is also a risk that Turkmenistan, swayed by Iran, will decide to connect Turkmen gas to the IPI (Iran-Pakistan-India) pipeline[12].

Political matters in the areas of natural gas are extremely volatile. The TAPI project can bring both financial and political benefits for Afghanistan. The country is expected to meet the real challenges and reach the agreement between the groups fighting against current government. Although the challenge is huge, the pipeline construction is definitely worth it. The scheduled commissioning date of the project is 2019 but the situation in the natural gas sector is changeable and a lot has yet to happen.

 
 
Kamil Sobczak is an academic covering energy policy issues and a member of the Association of International Petroleum Negotiators.

[3]

                A Brief History of Natural Gas in Afghanistan, Ministry of Mines and Petroleum, http://mom.gov.af/en/page/4750 2016

[4]

                Rising Security Risk for TAPI Pipeline in Afghanistan's Helmand Province, NaturalGasAsia, 17.01.2016 http://www.naturalgasasia.com/rising-security-risk-for-tapi-pipeline-in-afghanistans-helmand-province-17493

[5]

                Pakistan approves $200 m budget for TAPI gas pipeline project, NaturalGasEurope, 20.12.2015

[6]

                USAID, ADB, The World Bank, USDOD, ISAF

[8]

                The Asia Quest for LNG in a Globalising Market, IEA, 2014 p. 34.

[9]

                TAPI project to improve Afghanistan security: Experts, Pajhwok  Afghan News 12.12.2015 http://www.pajhwok.com/en/2015/12/12/tapi-project-improve-afghanistan-security-experts

[10]

                Reserves of natural gas -1,8 mld m3 EIA 2015 http://www.eia.gov/beta/international/country.cfm?iso=AFG

[11]

                TAPI to boost Afghanistan's bankrupted economy, The Kabul Times,  http://thekabultimes.gov.af/index.php/opinions/politics/9117-tapi-to-boost-afghanistan%E2%80%99s-bankrupted-economy.html,

[12]

                World Energy Outlook 2015, IEA, 2015 p. 548