The Hindu Business Line : Hedging on gas

The Union Cabinet's decision on the Petroleum Ministry suggestion (backed by the External Affairs Ministry) that India join the Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline project — thus altering the acronym to TAPI — was expected ever since New Delhi attended the TAP meeting held in the Turkmenistan capital of Askhabad as an observer and was given 90 days to make up its mind on the project. Clearly, the decision to join the project is a bid to hedge the bets on supplies of natural gas, especially in view of the recent complications that have arisen over energy-related projects with Iran.

In recent months, New Delhi has been on the lookout for energy tie-ups with various supply sources in view of the uncertainty over the projected Iranian supply of around 7.5 million tonnes of gas per year for 25 years from the end of the decade through the pipeline as also the five million tonnes of LNG supply from 2009 for an equal period, which has already been substantively agreed to by Teheran. Matters have been complicated by Pakistan agreeing to lift more gas from the Iran pipeline, which means that even if the project were to come through, India would get a smaller quantity of gas making the entire project relatively less attractive. It is against this background that one must also view the upcoming contract between Petronet LNG Ltd and a Chevron project in Australia for supply of 2.5 million tonnes of LNG for 25 years. Plans to enter into gas-import agreements with Qatar are also at an advanced stage, the projected quantity totalling around 7.5 million tonnes a year in two phases. In fact, given Qatar's substantial reserves and the friendly relations espoused by the visiting Emir in April last year, it is to be expected that New Delhi will focus on the Emirate as a principal source of gas supplies in the decades ahead.

As for the TAPI project, clearly it will not be easy to implement in view of the security problems associated with the 1,900-km pipeline traversing Afghan and Pakistani territories. Indeed the pipeline may be under enhanced threat because of Washington's declared support for the Asian Development Bank-approved project. Even so, New Delhi will have to pull out all the stops on the project not merely from the point of the economy's energy requirements but also as a means of putting pressure on Teheran (which has given itself till early August to make up its mind) to relent from its current hardline negotiating stance.