Revisiting India’s gas pipeline diplomacy

Clearing blockages in India’s energy plans

Manish Vaid

Trade and industry, International relations | South Asia

14 November 2016

It’s a challenge getting energy to flow from resource-rich nations to energy-hungry countries, as India has found out, Manish Vaid writes.

In recent years energy has become an increasingly-important driving factor in relations between nations. However, these energy politics are also influenced by the relative power changes between countries, fluctuations in oil and gas prices, and the condition of respective nation’s energy infrastructure. These factors play an important role in allowing energy to flow from resource-rich nations to energy-hungry countries.

India’s pipeline diplomacy, conceptualised during the 1990s, to import natural gas from countries like Iran, Turkmenistan and Myanmar, is an example of these limiting factors in practice, with none of the pipelines emanating from these three countries – Iran-Pakistan-India (IPI), Turkmenistan-Afghanistan-Pakistan-India (TAPI) and Myanmar-Bangladesh-India (MBI) – yet activated.

Nevertheless, the lack of success to date has not affected India’s sanguinity towards pipelines. And two out of the three pipelines are now either moving forward or in the process of being revived, as is the Oman-India Natural Gas Pipeline (OIP), initiated by former Indian Prime Minister, the late PV Narasimha Rao, during his visit to Muscat in 1993. The only exception is the IPI gas pipeline, which should be abandoned according to Iran’s Ambassador to India Gholamreza Ansari.

In the case of the TAPI pipeline, the project’s steering committee unanimously endorsed Turkmengaz as consortium leader of TAPI Pipeline, the entity officially in charge of building, financing, owning, and operating the pipeline. This development, together with the signing of TAPI’s shareholding agreement and the conclusion of an investment agreement by parties from the respective countries, have helped TAPI move forward. However, the issue of security, amid deteriorating relations between India and Pakistan and increased terror attacks in Afghanistan, has once again discouraged the efforts being made towards accomplishing this project.

More on this: India’s changing energy policy: moving toward a natural gas-powered economy

The government is also exploring ways to revive the MBI pipeline project. An Rs. 1,30,000 crore plan, involving the north-eastern part of the country, has been proposed as part of the broader Hydrocarbon Vision 2030 initiative. This initiative aims to create an energy corridor connecting neighbouring states such as Myanmar, Bangladesh, Nepal and Bhutan. But the MBI project still faces hurdles. Earlier in the process, India and Myanmar concluded an MoU, which selected the Gas Authority of India Limited as a preferential buyer of gas from the A1 and A3 blocks in Andaman Sea offshore Myanmar. Despite this, China ended up clinching the deal by signing a 30-year agreement to import natural gas in 2008. Indecision from Bangladesh at the time further delayed the project.

As regards the OIP project, the Joint Comprehensive Plan of Action (the ‘Iran deal’), together with recent technological advances made in laying deep-sea gas pipeline, which can now go to a depth of 4000 metres, are the two biggest factors allowing natural gas to flow from the Chabahar port in Iran to the Gujarat coast via Oman. This pipeline, as revived by South Asian Gas Enterprises (SAGE India), has been named the Middle East to India Deepwater Pipeline (MEIDP).

To date, therefore, out of several proposed transnational gas pipelines only the MBI and MEIDP hold promise, with the latter regarded as the best bet despite India’s efforts to look for cheaper LNG imports, until the gas glut scenario fades away, most likely after 2020.

While current landed LNG prices of below $5 per one million British Thermal Units (MMbtu) has prompted strong demand from large energy users such as fertiliser producers, power plants and in glass manufacturing, increases in spot prices would prompt India to look for cheaper and longer-term solutions through pipelines to be constructed by the SAGE India.

According to SAGE India, this pipeline will save up to $3.5-4.5 per MMbtu on liquefaction and regasification, as well as around $1.0 per MMbtu on transportation of LNG. This pipeline can also provide access to the additional export markets being sought by other Middle East countries and, in doing so, mitigate the geopolitical tensions created by onshore cross-country pipelines, such as the TAPI and IPI. In addition, SAGE India will enable the flow of 30 billion cubic metres of gas from Moscow to New Delhi through Iran by means of natural gas swap.

Moreover, Iran has already started to build a pipeline from Turkmenistan to its Chabahar port and has plans for a gas swap with Turkmenistan to be transported to India through the MEIDP.

Iran, which has the largest natural gas reserves in the region and has signed several agreements with India regarding the Chabahar port, would be best placed to support India’s gas-based economy plans, which could contribute to securing India’s energy needs at a rate that outstrips its population growth.

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Vaid, Manish. 2016. "Revisiting India’S Gas Pipeline Diplomacy - Policy Forum". Policy Forum. http://www.policyforum.net/revisiting-indias-gas-pipeline-diplomacy/.

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