Loan: Islamic Development Bank offers $500m for TAPI pipeline
ISLAMABAD: The Islamic Development Bank (IDB) – an international Islamic financial institution based in Saudi Arabia – has offered $500 million in loans finance the Turkmenistan, Afghanistan, Pakistan and India (Tapi) gas pipeline project, which will meet growing energy needs of three countries, an official says.
Turkmenistan will contribute 85% of the pipeline cost estimated at $10 billion whereas Afghanistan, Pakistan and India will have a 5% share each in investments. This cost is in addition to the $15 billion capital injection required for developing a gas field from where Turkmenistan will supply gas to the three countries.
Of the 85% cost, Turkmenistan will provide 51% of funds and the remaining 34% will be arranged by different financiers. “The three gas consumers could also enhance their investment share if desired,” the official said.
The field development work has been awarded to a consortium of Japanese companies, which will explore gas against a service fee and will not have any shareholding in the field. On the other side, the pipeline laying requires a huge quantity of pipeline material as well as compressors.
“The government of Turkmenistan has finalised a plan to conduct roadshows in the United Arab Emirates, Singapore and London in an effort to raise financing for the engineering, procurement and construction contract for the Tapi pipeline,” said a senior government official. It is expected to hold the roadshows soon.
China has emerged as a leading player in laying the pipeline in Turkmenistan. A Chinese company has won a contract that will build the pipeline over an area of 300 kilometres in the Central Asian state.
“Pipeline contracts in Afghanistan and Pakistan will be awarded by Tapi Company, which has been set up by the project stakeholders,” the official said.
The company will run and maintain the pipeline whereas Pakistan, Afghanistan and India will pay a tolling fee.
Turkmenistan, Afghanistan, Pakistan and India have already signed an initial investment agreement for the Tapi gas pipeline in a bid to kick off work, update feasibility study and finalise a pipeline route in conflict-stricken Afghanistan.
Leaders of the four countries performed the ground-breaking of the project in December last year, which would help ease energy deficit in South Asia. With the title of peace pipeline, the Tapi project is expected to bring peace and stability in the region because of cooperation among regional countries and reliance on each other for meeting the energy needs. The pipeline will connect South and Central Asia.
Pakistan and India will receive 1.325 billion cubic feet of gas per day each whereas Afghanistan will get 500 million cubic feet per day. Turkmenistan is expected to achieve financial close of the project by December this year.
Published in The Express Tribune, November 10th, 2016.