Flexibility from Participating Nations – Key to TAPI’s Success

In the last one month, two significant developments have brought the TAPI project back into the lime light. Reportedly, Dragon Oil evinced interest in participating in the TAPI project’s pipeline construction1. This is a major breakthrough for this ambitious, multilateral project that was facing the prospect of a silent burial a few months ago due to the absence of any leader for the consortium. But with Dragon Oil’s participation, construction of the proposed project can be expected to move ahead with full speed2. Following closely on the heels of this development, the four nations who have invested in the project participated in a ground-breaking ceremony in Ashgabat to commence pipeline construction3. But, despite the progress made in the last few weeks, the project still faces certain commercial constraints that have the potential to stall the pipeline construction. Foremost among these revolves around gas pricing concerns, primarily of India and Pakistan. As per recent reports in The Economic Times on November 9, 2015, India apparently is not happy about the unit price of gas quoted by Turkmenistan and is hoping to re-negotiate the issue4. Couple of years ago, similar concerns associated with gas prices for TAPI pipeline project were echoed by the Sustainable Development Policy Institute, an Islamabad based think tank5. It will be interesting to see how the Turkmen government responds to this fresh Indian move on gas price negotiations. For the continued sustenance of this project, it would be imperative for the Turkmen government to show some degree of flexibility on gas pricing. If that does not happen, it will perhaps force India to reconsider its participation in the project