The Hindu : Opinion / Leader Page Articles : Advantages of transnational gas pipelines

Online edition of India's National Newspaper
Monday, Apr 24, 2006

Opinion

Opinion - Leader Page Articles

Advantages of transnational gas pipelines

Talmiz Ahmad

The pipeline proposals India is involved with have political and security-related problems. But they have to be resolved for India's energy security.

NATURAL GAS, a `clean' fuel, is increasingly being seen as the fuel of the 21st century. Between 1980 and 2003, its share in the world energy mix rose from 18 per cent to 22 per cent. The demand is expected to increase further so that by 2025 it will constitute 25 per cent of the world energy mix and consolidate its position as the number two fuel.

Gas is primarily used in the power sector but is also an important fuel in refining and industry, as also in domestic consumption, particularly for cooking and heating. World electricity demand is expected to double between now and 2030, when power generation will account for about half of the world's consumption of natural gas.

The first transnational gas pipelines were constructed in the early 1970s, when the Soviet Union, at the height of the Cold War, began to supply natural gas to West Germany and other parts of Western Europe to meet the demand for alternative fuels amid high oil prices. Once the Cold War ended, the Russian supply of piped gas extended to the United Kingdom, Belgium, and the Netherlands. Today, Russia meets 30 per cent of Western Europe's gas requirements. This is expected to increase to 50 per cent in 25 years.

Technological innovation is making both production and transportation of gas increasingly economical. Over distances of up to 4,500 km, transporting gas by pipeline is cheaper by one-third than sending it as liquefied natural gas. Today, about 130 gas pipeline projects valued at $100 billion are being pursued across the world.

The principal sources of natural gas lie in Asia. The Asian area of Russia has 27 per cent of the world's proven reserves, followed by Iran (15 per cent) and Qatar (14 per cent). In fact, north and Central Asia and the Gulf together account for over 70 per cent of the world's reserves.

Over the next few years, there will be a proliferation of pipelines in Asia moving southwards and eastwards, as, over the next 25 years, the energy requirements of Asia are expected to increase two-and-a-half times. The consumption of gas will increase from 350 billion cubic metres (bcm) in 1997, through 1,050 bcm in 2020, to 1,400-1,575 bcm in 2030.

The Hydrocarbon Vision 2025 set out India's gas requirements in stark terms: from 49 bcm in 2006-07, India's demand for gas is expected to rise to 125 bcm in 2024-25. Against this, production from existing fields and discoveries is 52 bcm, leaving a gap of 75 bcm to be filled through new domestic discoveries and from imports. To obtain gas for its energy requirements, India is pursing three options together: development of domestic resources; pursuit of long-term LNG contracts; and participation in transnational gas pipeline projects.

All these efforts have met with some success. Foreign and Indian companies have announced major gas discoveries particularly in the Krishna-Godavari basin. While these are early days, there are suggestions that the Bay of Bengal could become the "North Sea of South Asia." Again, India has entered into two LNG contracts, with Qatar and Iran, for supply of five million tonnes per annum over 25 years. LNG from Qatar has been coming in from 2004, while supplies from Iran will commence from 2009.

However, it is India's participation in transnational gas pipeline projects that has seized the imagination of strategic affairs and energy security commentators, both Indian and foreign, on account of the political and geo-political implications.

The IPI project

The transportation of gas from Iran to Pakistan and India has a sound commercial basis. Iran has the world's second largest gas reserves, particularly offshore in the Persian Gulf. A pipeline from Assaluyeh to the Pakistan-India border would be about 1,900 km long, well within the range of economical gas supply by pipeline vis-à-vis LNG. Pakistan is gas dependent, with gas constituting 50 per cent of its energy mix; its fields are depleting, and from 2010 it is expected to need imported gas, its demand increasing to about 400 million standard cubic metres (scm) a day in 2025.

Conceived in 1989, the project fell victim to the differences between India and Pakistan in the 1990s and the early part of this century. The stalemate ended in January 2005 when India and Iran agreed to pursue the project as a straightforward purchase of Iranian gas at the Indian border, with a supplementary agreement between Iran and Pakistan covering the supply of gas to Pakistan and the transit of gas to India.

Several official and ministerial-level meetings among the three countries over the last year have served to clarify a number of issues pertaining to the project — technical, commercial, financial, and legal, as the three countries pursue a "safe and secure world class project." (India will obtain 90 million scm a day and Pakistan 60 million scm a day of gas from the project.) Tripartite meetings at the level of officials on technical and commercial matters have also taken place. Not surprisingly, the principal issues pertain to gas price and project structure. Decisions on these complex items are bound to take time as they will remain in force for 25-30 years.

However, throughout this period, the leaders of the three countries involved have repeatedly conveyed their full political support to the project and their deep interest in its successful outcome. Thus, the project has been effectively removed from the domain of extraneous bilateral, regional, and global political issues, and is being pursued only on the basis of commercial considerations.

The Turkmenistan-Afghanistan-Pakistan (TAP) project was first envisaged in the mid-1990s, but could not make headway on account of the civil war in Afghanistan. Interest in the project was revived after the installation of the Karzai Government, with the Asian Development Bank (ADB) as the lead development manager and consultant. In February this year, India was formally invited to join the project; the formalities in this regard will be completed in about three months' time.

The project has considerable geopolitical significance in that, for the first time, South Asia would have access to gas from Central Asia. Once the pipeline is operational, it is possible that Turkmenistan could evolve from a single source of gas to the pipeline into a regional hub, with pipelines from neighbouring countries such as Uzbekistan, Kazakhstan, Azerbaijan, and even Russia linking up with this pipeline to meet the increasing demands of South Asia. In due course, pipelines from the Caspian could also go to terminals in the Gulf to transport Central Asian LNG to South East Asia and North East Asia.

The Myanmar-Bangladesh-India pipeline project was seriously broached at a meeting of the Energy Ministers of the three countries, in Yangon, in January 2005. However, over the last one year, there has been no progress as Bangladesh has insisted on including references in the tripartite MoU to certain India-related bilateral issues that do not pertain to the project. India is, therefore, examining the possibility of transporting Myanmar gas through an overland pipeline through the Northeast, skirting Bangladesh, as also the possibility of transporting gas as CNG to receiving points on the east coast.

Transnational pipelines are difficult and complex ventures since: they involve different countries with different interests; they involve neighbouring countries, which frequently bring on board a substantial and complex political baggage of disharmony and discord. Besides, they pass through difficult terrain, as also politically and environmentally sensitive areas, and, hence, require the mobilisation of huge financial and technological resources from international sources in an atmosphere of mutual trust and confidence.

All the pipeline proposals with which India is involved are fraught with political and security-related problems that would need to be satisfactorily addressed. If these projects are to be realised, we must first accept that they are extremely important, indeed critical, for India's energy security interests. Once this is understood, international best practice can readily yield arrangements that would be put in place in regard to all aspects of the projects — technical, financial, commercial, and legal — that would serve to insulate them from the vagaries of day-to-day politics and provide the desired level of comfort to our policy-makers.

In order to understand the crucial role of these pipeline projects for India's energy security, we must have some understanding of their place in our energy mix.

The bulk of the gas required by India is destined to be used to fuel power projects in order to sustain a growth rate of 8 per cent per annum every year. As the Kirit Parikh Committee report has noted, to achieve this, up to 2032, India's primary energy supply will have to increase 3-4 times, while electricity supply will have to increase 5-7 times, that is, power generation has to increase from 120,000 MW to 778,000 MW by 2031-32.

Coal will continue to be the principal fuel in our power projects. Today, 90 per cent of the coal used for power generation is from domestic sources. However, with coal mines depleting rapidly together with concerns pertaining to pollution on account of the high ash content of domestic coal, India will have to increasingly look at other energy sources to meet its power requirements. Thus, India's increased power generation requirements will see a competition between domestic coal, imported coal, and imported piped gas.

One consequence of this increased dependence on imported fuel, be it piped gas or coal, will be the need to integrate our domestic fuel pricing structures with global trends. At the same time, given their common energy security interests, the countries concerned will have to replace their suspicions and differences with policies of cooperation and dialogue.

(The author is Additional Secretary, Ministry of Petroleum and Natural Gas. The views expressed here are personal.)

Printer friendly page
Send this article to Friends by E-Mail

Opinion

News Update

Stories in this Section

New Delhi out of step

Sensex at 12000

Advantages of transnational gas pipelines

Why the silence, a reader agonises

Racism rises in Russia

Business unfinished even after 16 years

Some questions for the Cauvery Tribunal

Biggest crisis for Bush as poll ratings slide