Entangled in the energy web



Farhat Akram

Commendable developments have materialised lately on various avenues of the energy sector in Asia with countries fostering forward their collaborations for fulfilling their energy requirements. The dream of making Asian gas grid could transform the quest for energy by Asian economies into a cooperative, not conflictive enterprise. Regional actors entangled subjectively in the web of interdependence, could generate far-reaching effect on the security, stability and development of the region, hence, locking their positions by working together in a manner of complex correlation.

The outcome of this interconnectedness would determine the future course of economics, politics, inter-state relationships, economic cooperation and security status of the region as a whole. With growing oil prices skyrocketing, the Asian country’s thrust for cheaper imported gas has acquired a greater urgency than ever before. In order to fulfil energy requirements, countries like Pakistan, India, Iran and China have leaned their thrust even to develop civilian nuclear technology to meet the needs of ever-expanding economies. Nowadays, we are totally dependent on an abundant and uninterrupted supply of energy for living and working. It is a key ingredient in all sectors of modern economies. It is high time that we must secure our future in the growing state of depleting energy resources.

As the new energy world order dawned with momentum in Asia, several key benchmarks have been achieved on aspired projects of the India-Pakistan-Iran (IPI) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipelines. These pipelines can be more appropriately called as the life lines of the economies of the subcontinent and beyond. Countries involved in both IPI and TAPI had serious reservations, which had caused them to remain reluctant in pursuing these projects. We are still in the state of wilderness as the projects actually set foot in the early 1990s and later failed to materialise as yet. Both projects got badly snagged in international and regional politics.

But the latest signing of the ‘Government Framework Agreement’ in Islamabad to initiate the TAPI project, readmission of India in the IPI, workable agreement between Pakistan and India on transit fee, recent agreement on the IPI to draft the final phase of the project and finally signing an accord, depicts active assertion of the stakeholders to remove the impediments in the way.

Both the projects will provide gas to the Asian developing countries, including Pakistan, India, China and beyond the region. These states have limited oil/liquid reserves to meet their demands. Rocketing prices and limited supply of oil, signifies the option of gas that is cheaper, cleaner and plentiful. In an increasingly environmentally conscious world, the developed countries see this as an attractive alternative to oil and mineral fuels. Hence, oil-producing states of the Persian Gulf are striving to develop their gas supplies to supplement their dwindling oil reserves. The landlocked El Dorados of Central Asia offers the energy hungry burgeoning economies to invest and evolve effective methods to transfer the resources.

These states have abundance of proven and unproven gas and oil reserves to be explored. It is quite mandatory for the states to develop the national strategies for robust exploration of not only indigenous resources but requires enhancing by trans-national energy options to meet the constraints. TAPI gas pipeline project begins from the Daulatabad gas field (Turkmenistan) and runs through Herat, Kandahar (Afghanistan), Quetta, Multan (Pakistan). The final destination of the pipeline will be the Indian town of Fazilka near the border between India and Pakistan.

The total length of the pipeline will be 1,680 kilometre to be built and operated by a consortium of national oil companies from the four countries. Furthermore, the cost of the project was just over $ 3 billion in 2003. Today, it is $ 7.6 billion. The pipeline is to begin its operations in 2015 if all the issues are resolved. The pipeline will transport 33 billion standard cubic metre (scm) gas from the Daulatabad gas field. There will be six compressor stations along the entire length of the pipeline and it will have to be guarded by the states they pass through, apart from the pipeline. The largest stretch will be between Quetta and Multan and the Indian border. The Asian Development Bank (ADB) provided the financial assistance of $ 1.0 million for the feasibility study of the project.

Several major risks were proving as impediments in materialising the TAPI project. Security of the pipeline is the most important in this regard, as it passes through the tumultuous region of Afghanistan where the security situation is far from satisfactory. Turkmenistan requested the UN to adopt a new convention guaranteeing pipeline security. The proposal represents the abandonment of fiercely nationalist policy adopted by Niyazove.

Turkmenistan’s claims of having reserves of more than 25 trillion cubic feet need to certify through an independent auditor. Issues like that of consortium formation, legal and regulatory framework, and issues of gas sales and purchase agreements need to be resolved. Political discords among the regional and international powers related to the US support to TAPI project due to contentious relations with Iran, Pakistan and India’s conflicts and disagreements on various issues and Pakistan’s constrained relations with Afghanistan are proving as hindrances in the way.

The rival IPI pipeline, conceptualised in 1989, has the potential to link the Persian Gulf with the roaring economies of the Far East. The proposed pipeline would deliver gas from Assalouyeh in southern Iran through Balochistan and Sindh provinces of Pakistan and then to India. This pipeline was hampered by conflicts, ranging from security to pricing and finalising the framework. The pipeline runs 1,700 miles with 3.2 billion cubic feet per day of Iranian gas to Pakistan and 2.1 billion cubic per day to India by 2011. Moreover, the cost of the project is nearly $ 7-8billion. To settle the major issues apropos pricing, Iran demands that the clause to revise the gas price every three years to be incorporated into the agreement, which both India and Pakistan disagreed.

If substantiated effectively, IPI pipeline will also assert and depict independent foreign policies adopted by Pakistan and India on issues of high priority related to energy certainly wanting to break from the pressure to abort the plan. With the warning to India against joining the project by the US because of Iran, it demonstrated a sign of thrust to move forward for the project. The US lured India to have the much aspired civilian nuclear deal to meet its growing energy demands. However, early this year, when India showed reluctance in the IPI project, Pakistan declared that China would become part of the project and convert it into IPC. This proclamation shocked India. While depending on the feasibility of the project, China illustrated keen interest in making this a reality having necessary expertise and resources. With a growing demand in the domestic markets soaring, involvement of China led India to participate with revised sense of urgency.

For India and Pakistan, it is difficult to show the same level of consent on the IPI because of the divergent foreign policies and priorities involved. Pakistan has deep-rooted and closer relations with Iran and supports it on various issues, either nuclear or forming a regional energy grid. Pakistan clearly realised that Iran sees the IPI as both a source of valuable foreign exchange as well as warding off the mounting US and other Western powers to isolate Iran on its nuclear enrichment foreign policy. For both states, it would be appropriate to understand the emerging reality that in the near future the solution to the Afghan problem is far from being a reality and TAPI project is less likely to be practically implemented. The option was propounded that instead of TAPI, a revised Turkmenistan-Iran-Pakistan-India (TIPI) may be implemented. This is actually a more feasible and viable solution with less troubles for the project.

On the one hand, the IPI project carries greater political price for both Pakistan and India than on the other hand TAPI has been put on hold because of security and sensitive areas in the way. But the fact remains that nearly all roads that provide energy security in Asia lead from Tehran. Iran’s ability to act as an energy corridor for the Subcontinent is indisputable. In the rapidly intensifying international energy competition, Iran holds the master key to the most staggering political and economic roadblock that impedes the economic growth. The problems will not be solved while isolating Iran but close and competitive environment leads to prosperity.

The fact remains that TAPI and IPI will be operational in the domains of disorder, lying between the economically poor regions. Afghanistan has reluctantly been controlled but still has the seeds of insurgency expected to be blossoming this summer as illustrated by the attack on President Hamid Karzai with a loud and clear message. On the other hand, Pakistan presents a shaky coalition government that has been involved in settling the domestic political instability by paying more attention to resolve the economic issues. Therefore, it can be concluded that TAPI and IPI could not become good devices of leverage unless and until Pakistan is to set its house in order and become a democratic and stable state.

The writer works as Assistant Research Officer, Islamabad Policy Research Institute (IPRI)