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India to revive West Asia pipeline plan

New Delhi: With a pair of planned transnational gas pipelines entangled in geopolitical knots, the government is reviving a 10-year-old private sector proposal for an under-sea gas pipeline linking West Asia with India, seeking to plug a chronic demand-supply gap, said two senior government officials associated with the process.

The $3 billion (Rs15,150 crore), 2,000km pipeline has been proposed by South Asia Gas Enterprise Pvt. Ltd (SAGE), a special project vehicle set up as an equal joint venture between the Siddhomal group, an Indian firm, and UK-based Deep Water Technology Co.

A meeting has been scheduled on Thursday between SAGE and the ministry of petroleum and natural gas to discuss the project in detail.

A proposed pipeline that would transport gas from Iran through Afghanistan and Pakistan to India has run into problems because of the escalating internal crisis in Pakistan—which has made it difficult to guarantee the safety of such assets—and a deterioration in relations between New Delhi and Islamabad.

“We are looking at this route to bring gas to India. The talks are at a preliminary stage,” said a top petroleum ministry official, who did not want to be named. The second project that has been stuck is a Turkmenistan-Afghanistan-Pakistan-India pipeline.

According to initial plans, the pipeline proposed by SAGE will originate from Oman and will end either in Gujarat or Maharashtra. For the gas to be routed to Oman from Qatar and Iran, an additional infrastructure investment of $3 billion is envisaged, a SAGE official said. Gas sourced through this will carry an additional transportation tariff, which will accrue to SAGE.

“The challenges of economics and geography in setting up this pipeline is huge. It will be difficult to implement,” said a Delhi-based energy sector analyst, who did not want to be named because of commercial considerations. “There will be problems.”

It will take five years for the project to be completed and it will have a capacity of 31.1 million standard cubic metres of gas a day (mscmd). The expected transportation tariff from the project is $1.8 per million British thermal units (mBtu). Currently, natural gas is priced at $4.4-$4.5 per mBtu in the international market.

“For (the) Turkmenistan-Afghanistan-Pakistan-India pipeline and (the) Iran-Pakistan-India pipeline, there are issues beyond price,” said a senior official at the external affairs ministry, who didn’t want to be named. “Here, the issue is political uncertainty, which may affect the pipeline security.”

“Iran is a less complicating factor than Pakistan,” this official added. “India can now afford a really independent policy in Iran post the nuclear deal (with the US). This pipeline will be cheaper than LNG (liquefied natural gas). While the idea was being promoted 10 years back, it has now found favour.”

The project needs the support of the Indian government to become reality. “Transnational gas pipeline projects are politically and logistically challenging. They take several years to develop, with the blessings and support of all concerned, including the local governments, in order to become a reality,” said Subodh Kumar Jain, director of SAGE, in an emailed response to Mint queries.

India imports around 26mscmd of LNG. The country is short on natural gas, which is expected to last till 2012. It needs around 180mscmd, while the supply is 106mscmd.

“An international SPV (special purpose vehicle) will be formed for implementation of the project... This pipeline would be designed and built by an international consortium. Global consortium members include (deep-water pipeline specialists) Heerema Marine Contractors and Intecsea,” Jain added.

According to a report by management consulting firm AT Kearney Inc., demand for gas in India will continue to exceed supply from domestic sources and imported gas will play an important role in bridging the demand-supply gap in the Indian market.

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