Bloomberg News

India’s Reddy Said to Travel to Turkmenistan for Gas Deal

May 22, 2012

India’s oil minister, S. Jaipal Reddy, will lead a team to Turkmenistan to sign a deal to get natural gas through a pipeline, according to three people familiar with the matter.

GAIL India Ltd. (GAIL), the nation’s biggest gas distributor, and TurkmenGas, Turkmenistan’s national gas company, plan to sign the agreement tomorrow, the people said, asking not to be identified because the matter hasn’t been officially announced. India’s cabinet approved the oil ministry’s proposal to sign the sale and purchase agreement for the pipeline project, including the price of gas, on May 17.

The U.S., which plans to end its military presence in Afghanistan, backs the 1,680-kilometer (1,044-mile) pipeline that will pass through the country and Pakistan as an alternative to a line from Iran. The gas will help meet demand in energy-starved India and Pakistan, which are seeking to stimulate businesses, boost trade and ease travel restrictions after fighting three wars since the end of British colonial rule in 1947.

“There are security concerns in Afghanistan and I don’t see who is going to ensure uninterrupted flow of gas through the pipeline,” said Bharat Karnad, a security analyst at the New Delhi-based Centre for Policy Research. “The U.S. supports this project but they’re in the process of pulling out of Afghanistan.”

Gas Supply

GAIL shares fell 2.1 percent to 313.90 rupees at the close in Mumbai, the most since April 26. The stock has declined 18 percent this year, compared with a 3.7 percent increase in the benchmark Sensitive Index. (SENSEX)

The pipeline, with a capacity of 90 million cubic meters a day, will be completed in 2018 and will supply gas for 30 years, the Indian government said in a May 17 statement. India and Pakistan will each get 38 million cubic meters of gas a day and Afghanistan 14 million from Turkmenistan’s Galkynysh field, according to the statement.

India’s share is about 29 percent of the country’s average daily gas output in the year ended March 31, according to oil ministry data.

Reddy wasn’t available for comment when called at his office. GAIL Chairman B.C. Tripathi declined to comment.

India, which had been in talks to build a gas pipeline from Iran, wasn’t a signatory to an agreement between Iran and Pakistan to supply the fuel by 2014. The U.S. has urged nations including India, Japan and countries of the European Union to stop buying oil and gas from Iran, which it accuses of seeking to build nuclear weapons. Iran has maintained it’s pursuing atomic energy for civilian purposes.

Gas Reserves

India, the world’s second fastest-growing major economy, needs to import gas to help offset a decline in domestic output. Turkmenistan is seeking additional markets after becoming the fourth-biggest holder of gas reserves, according to a 2011 report by BP Plc. Russia holds the world’s largest and Iran the second-biggest, according to the report.

U.S. troops are pulling out of Afghanistan as a decade-old war draws to a close.

After 2014, “the Afghan war as we understand it is over,” President Barack Obama said May 20 after meeting with Afghan President Hamid Karzai.

India will pay for the gas only when it is delivered at its border, Press Trust of India reported March 17, citing a person it didn’t identify. Afghanistan and Pakistan will sign agreements with India to provide security to the pipeline, for which India would pay 50 cents per million British thermal units as transit fee, according to the report.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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