TAPI pipeline: transit fee likely to be finalised by next month

The GSPA relating to the TAPI pipeline has not been signed yet

Updated - November 17, 2021 03:26 am IST

Published - April 26, 2012 10:45 pm IST - NEW DELHI:

With India, Pakistan and Afghanistan reaching a broad understanding on the issue of transit fee for import of natural gas through the proposed $7.6 billion Turkmenistan, Afghanistan, Pakistan and India (TAPI) pipeline project, the nations concerned are likely to meet next month to sort out the issue and give it a final shape.

Although all the parties agreed in principle to go ahead with the pipeline and no formal agreement had been signed, the progress had been quite outstanding on the issue. However, a formal agreement had not been signed, Minister of State for Petroleum and Natural Gas, R.P.N. Singh said. The next round of talks is scheduled to be held in Ashgabat in Turkmenistan on May 6.

All the three nations had met in Islamabad early this month to work out the issue of transit fee but no breakthrough could be achieved as India showed its reluctance to accept and pay the transit fee being asked by Afghanistan. During the trilateral talks, India had declined to pay the 50 cents per million metric British thermal unit (mmBtu) as transit fee for the gas.

However, the Indian side is learnt to have offered to stretch its offer to 47 cents per mmBtu and had sought time to get the approval of the government before coming back to the negotiating table. It was decided that this issue would be taken up at the next round of talks on May 6 where officials of the World Bank would also be present.

The U.S. is backing the TAPI pipeline and Pakistan and India have agreed in principle that Pakistan would charge the same transit fee that India would pay to Afghanistan for transportation of gas through its territory. The pricing of gas has been agreed between Turkmenistan and India.

The contract price of TAPI gas is linked to a formula which contains indices based on fuel basket and other indices which are not as volatile as crude oil. The formula is similar to the ones used in international contracts. The Gas Sale and Purchase Agreement (GSPA) relating to the TAPI pipeline, which includes, inter alia, the pricing of Turkmen gas has not been signed as yet.

The U.S. is backing the pipeline as an alternative to the India-Pakistan-Iran (IPI) pipeline that has been stalled for quite some time now due to U.S. pressure on India and Pakistan not to go ahead with the project. The 1,735 km pipeline will run from the Turkmenistan gas fields to Afghanistan. It will start from the Dauletabad gas fields and run into Afghanistan alongside the highway running from Heart to Kandahar and then via Quetta and Multan in Pakistan.

The final destination of the pipeline will be Fazilka near the India-Pakistan border.

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