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A Qatar-to-India Pipeline?
Tuesday, September 01, 2009

While the much talked about India-Pakistan-Iran (IPI) gas pipeline remains in limbo, there has been progress in a proposed deep-sea gas pipeline from Qatar, via Oman, to India.

In August, state owned utility Gas Authority of India Limited (GAIL), which is keen on sourcing new gas supplies, signed an agreement with the New Delhi-based South Asia Gas Enterprise Pvt. Ltd (SAGE), aimed at building a 2,000-kilometer deep-sea gas pipeline from Qatar to Oman and then on to the Indian states of Gujarat or Maharashtra. No cost estimates have been published, but the final price tag for such a project would almost certainly exceed $10 billion.

GAIL is India 's flagship natural gas company, integrating all aspects of the value chain - exploration and production, processing, transmission, distribution and marketing. It expects the Mideast pipeline will be built given the never-ending delays on the IPI line and the ongoing increases in India’s gas consumption. And new gas supplies from the Krishna-Godavari (KG) fields on India ’s east coast won’t be enough to slake demand.

Currently, Qatar supplies the bulk of rising natural gas imports into India in the form of liquefied natural gas (LNG) and those imports are slated to double this year. In 2008 India imported between 6.5 and 7 million metric tons (mt) of LNG, about 0.9 to 1 Bcf per day.

India’s Petronet buys 5 mt a year of LNG from Qatar ’s Rasgas and another 1.5 mt from BP and others for its 10 mt Dahej terminal. Imports from Rasgas are due to rise to 7.5 mt next year.

SAGE, an Indian private sector initiative, is a joint venture between the Siddhomal group, an Indian firm, and UK-based Deep Water Technology Co. The venture is independent of state-to-state negotiations for implementing trans-national pipelines which have generated headlines in recently. The consortium has claimed financial feasibility in connecting India to the Gulf and is looking to create a $3-billion natural gas transportation infrastructure, with another $3 billion needed if Iran is brought into the loop.

If all goes well, the SAGE energy corridor is expected to be completed by about 2015. The pipelines would reach a depth of 3,500 meters and the terrain has been extensively surveyed over the last two decades.

In the first phase, 31 million cubic meters per day (1.1 Bcf per day) could be transported to the Indian west coast from Qatar. Three pipelines are expected to be laid. The deepwater pipelines will traverse the Arabian Sea south of territorial waters and economic exclusion zones of all third party nations.

The financial and technical issues are challenging. No pipelines have ever traversed such deep waters. But a senior official from GAIL, told Energy Tribune “We expect that the pipeline will draw good investment response from players in India and West Asia . GAIL has procured intensive studies conducted by leading oil and gas industry deepwater pipeline specialists, Heerema Marine Contractors and INTECSEA, who have said that the Mideast pipeline project is technically feasible. This was an important consideration in signing the deal with SAGE.’’

India’s interest in the Mideast pipeline stems from failed efforts in sourcing gas from Iran, Myanmar and Bangladesh. And suspicions between India and China have meant that the prospects of a South Asian oil and gas grid remain slim.

The pan-Asian grid was to connect hydrocarbon extracted in West Asia and Southeast Asia to the main markets in Turkey, India , China , Korea and Japan .

Meanwhile, India’s efforts to build a 1,400-kilometer Indo-Myanmar gas pipeline have failed, even as China has become the sole buyer of Myanmar gas from its Shwe fields, where ironically, India’s largest oil and gas companies, ONGC and GAIL, own large stakes. Transit and security issues raised by Bangladesh and Beijing ’s superior financial, strategic and military muscle in the region have meant that India lost out.

The proposed $7.5 billion IPI pipeline remains stuck for many reasons including America ’s misgivings about any country doing business with Iran. The pipeline, if constructed, has the potential to deliver 5.3 Bcf per day of gas from southern Iran to Pakistan and India. Though the Iran-Pakistan portion of the pipeline is making some progress, there are reports that Washington is pressuring Islamabad to refrain from the pipeline. Washington has threatened sanctions under the Iran Refined Petroleum Sanctions Act that has the backing of the US Congress.

With a reserve of nearly 23 Tcf of natural gas, Bangladesh offers an attractive option for India that remains unexplored. Since the gas reserves exist in the eastern parts which face political turmoil, the India-Bangladesh gas corridor has not materialized.

Further, Dhaka has linked gas supply with other bilateral issues such as reducing its trade deficit that has stymied any progress. This has also affected the transit pipeline from Myanmar via Bangladesh .

India, however, has some hopes from the US-backed $ 3.5 billion Turkmenistan-Afghanistan-Pakistan (TAP) pipeline. India is studying the TAP project, but feasibility reports have been mixed.

Obviously, India needs more gas. And that hunger for methane has the country looking in every direction, and at every possible partner.

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