Identifier
Created
Classification
Origin
08ASHGABAT1443
2008-11-05 11:37:00
CONFIDENTIAL//NOFORN
Embassy Ashgabat
Cable title:  

TURKMENISTAN: OBSTACLES APLENTY FOR TAPI PIPELINE

Tags:  EPET PREL ADB ZK XD TX 
pdf how-to read a cable
VZCZCXRO3517
PP RUEHAG RUEHBI RUEHCI RUEHLH RUEHPW RUEHROV
DE RUEHAH #1443/01 3101137
ZNY CCCCC ZZH
P 051137Z NOV 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1806
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 4460
RUEHBJ/AMEMBASSY BEIJING 2272
RUEHKO/AMEMBASSY TOKYO 2137
RUEHIT/AMCONSUL ISTANBUL 2708
RHEHNSC/NSC WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 3027
C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001443 

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: DECL: 11/04/2018
TAGS: EPET PREL ADB ZK XD TX
SUBJECT: TURKMENISTAN: OBSTACLES APLENTY FOR TAPI PIPELINE
PROJECT

Classified By: Charge d'Affaires a.i. Sylvia Reed Curran for reasons
C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001443

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: DECL: 11/04/2018
TAGS: EPET PREL ADB ZK XD TX
SUBJECT: TURKMENISTAN: OBSTACLES APLENTY FOR TAPI PIPELINE
PROJECT

Classified By: Charge d'Affaires a.i. Sylvia Reed Curran for reasons 1.
4 (B) and (D).


1. (C) SUMMARY: Progress on the Asian Development Bank's
("ADB") proposed gas pipeline from Turkmenistan to India is
beset by challenges as the proposed project enters its sixth
year. Working group meetings to finalize key agreements have
been repeatedly postponed. From the Turkmen side,
authorization to sign agreements has been slow in coming.
Pricing will be negotiated on a bilateral basis and
significant differences remain. It is unclear whether the
next round of meetings planned for December will take place
due to an inability to finalize key agreements. Besides
financial and security challenges beyond Turkmenistan's
border, the project's prospects are tied to Turkmenistan's
ability to fill the pipeline with gas. A ready supply in
need of a market could go far in eliminating at least the
bureaucratic delays that beleaguer the project. END SUMMARY.


2. (C) ADB's Ashgabat-based liaison officer Ayna Kekilova
recently provided an update on the status of the
Turkmenistan, Afghanistan, Pakistan and India (TAPI) natural
gas pipeline project. The initial project proposal was
prepared in 2002 and the project feasibility study was
completed in 2004. Since that time, ten ministerial and
higher-level steering committee meetings have taken place,
most recently in Islamabad in April 2008.

TECHNICAL WORKING GROUP MEETINGS DELAYED


3. (C) In addition, a TAPI pipeline technical working group
was established. It has met three times, twice in Ashgabat
in April 2007 and September 2008. It also met in Islamabad
in April immediately before the steering committee meeting.
Kekilova explained that the first working group meeting took
one year to arrange. When the Turkmen government learned
that ADB did not plan to attend the meeting, it threatened to
cancel the event, insisting that ADB be present and
facilitate the meeting. The GOTX has taken the position that
it will not discuss the TAPI project multilaterally without
an ADB presence. A fourth working group meeting was planned

for October in New Delhi, but it was delayed due to a lack of
progress on outstanding issues. ADB would like the meeting
to take place in November in order to precede the next
steering committee meeting, at which the participants are
supposed to sign off on the group's work.


4. (C) Current sticking points for further progress are: a)
the signing of the new Heads of Agreement, which has been
amended to reflect India's participation in the project; and
b) conclusion of a gas sales and purchase agreement. The
Heads of Agreement designates the responsibilities of the
project partners. It was planned that the Heads of Agreement
would be signed during the September working group meeting.
Turkmen officials at the working group had not received
authorization to sign, but expected it shortly and urged the
others to sign. Afghanistan and Pakistan officials did sign,
but India decided to wait until the Turkmen would also sign.
Meanwhile, the Turkmen have still not signed. Kekilova
explained that authorization is held up at the Cabinet of
Ministers level. She added that she has difficulty
explaining to ADB headquarters that no GOTX minister is
authorized to make the decision, but instead that it has to
go to "the very top level." Kekilova said the September
working group meeting was also delayed one month because the
necessary paperwork had to go to President Berdimuhamedov.

SIGNIFICANT DIFFERENCES IN PRICING


5. (C) Concerning the gas sales and purchase agreement,
Kekilova explained that the Turkmen government wants this
agreement to be a general document, after which it will
negotiate firm prices bilaterally with each partner.
Initially, ADB had proposed a lengthy, detailed sales

ASHGABAT 00001443 002 OF 002


agreement that was intended to satisfy potential investors.
The Turkmen side responded that the agreement could be a
maximum of 30-40 pages and would serve as the basis for the
bilateral sales contracts. The GOTX provided a template
based on its agreements with Russia and China. According to
Kekilova, the Turkmen Ministry of Oil and Gas has conducted
bilateral negotiations with all three countries concerning
pricing and proposed a formula similar to what it uQ with
Russia. Agreement has been reached with Afghanistan, and is
becoming closer with Pakistan as the two sides agree on some
aspects. India, however, has proposed a completely different
pricing structure that takes into account coal and LNG
prices. Kekilova expressed doubt over whether an agreement
could be reached with India because of their different
approaches to a pricing structure.


6. (C) The cost of the project was originally estimated in
the range of USD 2 - 2.5 billion in the 2004 feasibility
study. Once all necessary agreements are reached between the
cooperating countries, theQign and construction phase
would take four years. The project is supposed to be
connectedQh the Dauletabad gas field in Turkmenistan. The
Turkmen government has not provided an audit of reserves to
all parties that shows proven reserves are sufficient for the
agreement. However, it has expressed a willingness to use
all its reserves, not just the Dauletabad field. Kekilova
mentioned that a risk assessment was included as part of the
feasibility study, but given current conditions in
Afghanistan and Pakistan, a new risk assessment will need to
be done. She also referred to the Turkmen government's
position that they will sell their gas at their border and
will construct the pipeline within their territory, but that
they are not concerned about issues beyond their border.

PARTIES COMMITTED DESPITE DIFFICULTIES


7. (C) Kekilova said ADB has spent about USD four million on
the project to date, including more than USD one million for
the feasibility study, and wants to see it built. She also
described the Turkmen position that they will build the
pipeline up to their border with Afghanistan, sell the gas at
the border, and don't care about what happens beyond the
border. When ADB has asked officials at TurkmenGas and the
Ministry of Oil and Gas whether they want the TAPI pipeline,
they say they are ready to sign. However, Kekilova indicated
the obstacle is the lack of a decision from President
Berdimuhamedov and conveyed through Deputy Chairman for Oil
and Gas Tagiyev.


8. (C) COMMENT: Obstacles clearly abound on the path ahead
for the TAPI pipeline, not the least of which is the
sluggishness of the Turkmen government's bureaucracy. As
long as Turkmenistan's gas production remains inadequate to
supply its domestic needs plus current commitments to Russia,
China and Iran, it's not clear that the Turkmen have much
incentive to move ahead quickly. In addition, security and
financing issues wholly beyond Turkmenistan's border will
need to be addressed. Since ADB's commitment remains firm,
it's likely that the partners will continue to negotiate in
fits and starts as they have to date, and the project will
remain "proposed." That said, the development of excess gas
production capacityQt could fill the pipeline would be a
significant motivator for the Turkmen government to conclude
agreements with its TAPI pipeline partners. END COMMENT.
CURRAN