GAS PIPELINE PROJECTS ARE VITAL

From Shamim Ahmed Rizvi, Islamabad
Jan 31 - Feb 06, 2005

The Asian Development Bank (ADB) has strongly recommended to the Government of Pakistan to start work immediately either on Turkmenistan-Afghanistan-Pakistan (TAP) or Iran-Pakistan-India gas pipelines projects in view of possible gas shortage, which might consequently become acute by 2008-09.

The note of warning was sounded by Marshuk Ali, ADB's country director for Pakistan, at a recent press briefing in Islamabad. He was of the view that the techno-economic study of the Daulatabad gas fields has already been proved its viability as a sustainable source for supply of gas through Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline project.

In this respect, the international consultants hired by ADB have completed the feasibility report of the cross border project, which would be presented in the TAP steering committee meeting to be held in Islamabad next month. The draft framework is ready, and hopefully several agreements are likely to be signed during the meeting.

The ADB country director announced that the bank plans to provide about $2.192 billion development assistance to Pakistan during 2005-06 for achieving higher growth and ensuring that the benefits of the ongoing structural reforms reach the poor. He said that in 2005, the bank would provide $797 million for 11 projects (plus one standby project for $10 million). Out of the total amount, $354 million will be provided through the highly concessional ADB window and $443 million through the OCR.

Main areas of the ADB's assistance to Pakistan this year are infrastructure development, capacity building, agri business and rural development and modernization, mega city renewal and development, and support of public resource management and devolved social services. The program also includes $5.65 million in grant assistance for 20 technical assistance projects.

In 2006, the bank would provide 13 loans worth $1,395 million for agriculture and natural resources, energy, law, economic management, transport and communications. Marshuk showed satisfaction on the current economic situation and said that all the economic indicators were moving in the positive direction, however, he expressed the apprehension that rising high inflation in the country is likely to hit poverty alleviation efforts.

In 2004, the ADB lent $709.2 million for seven public sector financed projects with economic growth as the primary development objective. Of this amount, $228 million was from the ADB and $ 481.2 million from the OCR. Besides, a total of $28.6 million in grant assistance (including co-financing grants) was also approved for 22 technical assistance in 2004. These include Sustainable Livelihoods in Barani Areas project ($41 million), Balochistan Resource Management program ($133 million), Restructuring of Technical Education and Vocational Training projects in Balochistan and NWFP ($16 million and $11 million, respectively), Devolved Social Services Punjab ($150 million), NWFP Road Development Sector and Sub-regional Connectivity project ($301.2 million) and Multi-sector Rehabilitation and Improvement project for the AJK ($57 million).

The ADB director said that of these, the most innovative projects included Balochistan Resource Management program, NWFP Road project and the Multi sector Rehabilitation project for the AJK. He said that the focus of these projects was to support the government of Balochistan's pro-poor development efforts by improving governance, public resource management, and social sector service delivery.

About the NWFP Road project, he said, it aimed at increasing access of the rural population in the NWFP to social services and markets, and improves sub-regional cooperation and trade by facilitating road transport to Afghanistan and Central Asian Republics. While the AJK project has the objective to improve the living conditions, quality of life, and economic prospects in the AJK by rehabilitating and reconstructing essential physical and social infrastructure in education and health sectors that has been damaged by years of neglect, he added. He also said that the ratio of delaying ADB's projects has come down to 17 percent in 2004 as against 30 percent two years back, showing the bank's efforts to help Pakistan in catching higher sustainable GDP growth. However, the bank was fully aware and trying to abolish hurdles in the way of about 10 delayed projects.

The 1600-kilometer long TAP pipeline, costing some $3 billion, is supposed to connect the Daulatabad gas fields in south of Turkmenistan through southern part of Afghanistan to Multan or Gwadar in Pakistan. It can go further to India, if it is willing to join to overcome the growing energy shortages. The project was put on hold several times since the signing of a trilateral framework agreement in December 2002. The last major hurdle was the lack of reliable information about the remaining gas reserves in the Turkmen fields, and potential market demand in Pakistan and India for the next 25 years.

The bank said the feasibility study has shown positive results, indicating viability of the ambitious project. The Caspian Sea Region holds some 232 Trillion Cubic Feet (TCF) of gas reserves, which are comparable to Saudi Arabia. However, the bank maintains that security of the pipeline was still a major issue for all the stakeholders. The bank proposed development of reliable gas storage in different locations in Pakistan, to be developed by pumping in gas at the depleted gas fields, to be pumped out at the time of emergencies, like disruptions, terrorist activity or even to meet higher winder demand.

The bank is also studying the possibility of such storage sites in the country that are crucial to ensure reliability of the system and uninterrupted supplies throughout the year. Since such storage would be linked to main domestic pipeline network, the government could easily meet demand during any eventuality like the recent disruptions due to Sui blasts.

On the issue of the financing of the project, which the latest estimate of the bank projected at $3 billion, there was a proposal to establish a consortium with the participation of the multilateral agencies to give some confidence to the investors and all the participating states. Leading UD companies like UNOCAL formed a consortium, including Delta of Saudi Arabia, Itochu of Ja pan, Inpex of Japan, Hyundai of South Korea and Crescent of Pakistan. Recently, the Russian energy giant Gazprom was also keen to join in. Similarly, there were indications that Chinese companies like China Petroleum Engineering and Construction Company (CPECC) was interested in such a mega regional infrastructure project.

China, which had concerns over US military presence in Afghanistan and the Central Asian Republics, intends to reinforce its regional presence through improved commercial ties, if not on military grounds.