BUILDING INDIA’S FIRST INTERNATIONAL PIPELINE – Pvt Energy Co Likely to Head Consortium to Build Pipeline

Co, to be appointed by Oct, will get majority stake and remaining will be divided equally between existing partners
A private energy firm is likely to be appointed by October as the head of the consortium to build India’s first international pipeline that will bring natural gas from Turkmenistan, traversing 1,800 km via Afghanistan and Pakistan.After several rounds of negotiations, the four countries have resolved most concerns and plan to begin the bidding process in a month to select the leader of the consortium that would build, own and operate the pipeline, a source with knowledge of the negotiations said. The project has been delayed for several years in the absence of head of the consortium. It would take four years to build the pipeline after the consortium leader is selected, he said.

India may have to pay $9-10 (about ` . 558-620) per unit for gas landing at its border, which includes the transport cost and $5.5 per unit Turkmenistan is seeking for gas from its fields, the source said. India’s domestic gas price, which follows a formula linked to international prices and revised every six months, is about half that level, while the international spot price of liquefied natural gas is about $7 per unit.

A consortium of the four coun tries represented by their respec tive state-run energy firms is al ready in place. The lead, a private firm, will get a majority stake in the consortium with the remain ing stake equally divided be tween the existing partners, the source said, adding that the lead er can further dilute its stake in favour of financial investors.

The project, estimated to cost $7.6 billion in 2008, requires a pri vate lead because of massive capi tal requirement and the expertise to build and operate transnation al pipelines, which the existing consortium partners lack.

French multinational Total SA seems to have found favour with Turkmenistan, the source said adding that the other three coun tries in the game would not like to have the contract awarded unilaterally to any party but would want all interested play ers, including Russian and Chi nese energy firms, to bid for it.

Turkmenistan, which has the world’s sixth largest gas reserve has heavily depended on China and Russia all these years for gas export, and a successful pipeline to India can reduce this depend ence and diversify the energy export basket for the landlocked nation.

Earlier, American firms Chevron and ExxonMobil had expressed keen interest in laying the pipeline but seem to have lost interest after Turkmenistan refused to offer equity stake in its gas fields citing local laws. Potential consortium leaders have wanted a commitment from Turkmenistan over control on the country’s fields, whose output would flow through the pipeline.

Turkmenistan now seems eager to offer Total a participation in its gas fields without changing its laws, the source said.

Another key concern for private operators is the security of the pipeline. Assurances on this have come from Afghanistan and Pakistan, where the risk to the project is high due to the dominance of militias in the path of the pipeline, but a consortium leader might insist on more specific security terms before signing a deal, the source said.

The pipeline aims to export 33 billion cubic meters of natural gas per year. India is expected to get 38 million cubic meters per day, helpful for a country that has several gas-fired power plants lying idle or unutilised.

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