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India to pay USD 13 per unit for “peace pipeline” gas

28th May 2012

India, Pakistan, Afghanistan and Turkmenistan last week inked a historic gas sale purchase agreement (GSPA) for a USD 7.6-billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, touted as the peace pipeline.

The TAPI pipeline is likely to boost peace and give new shape to regional energy cooperation

India will pay USD 13 per unit for buying natural gas through the TAPI gas pipeline and will take indirect responsibility for safe transit of the fuel through high security risk areas in Afghanistan and Pakistan, according to reports. 

India on 23 May signed agreement to buy natural gas from Turkmenistan at a rate equivalent to 55 per cent of crude oil price which, at USD 100 a barrel, equivalent to USD 9.17 per million British thermal unit, according to the Economic Times. 

After adding transit fee and transportation charges, the gas through Turkmenistan-Afghanistan-Pakistan-India (TAPI) line would cost USD 12.99 per mmBtu at the Indian border, three times the price paid to ONGC and Reliance Industries for producing natural gas from domestic fields, said reports.

The rate agreed flies in the face of India's oil ministry which has been stonewalling any increase in price to be paid to domestic producers arguing that a higher gas price would lead to an increase in power tariff and cost of fertiliser, thereby entailing higher government subsidy outgo.

Besides the higher price India has also, in a Gas Sales and Purchase Agreement (GSPA) signed in Caspian Sea resort of Avaza, Turkmenistan, agreed to take delivery of natural gas at Turkmen-Aghan border.

GAIL India, which signed the GSPA, will then entrust the delivery of the gas to a consortium which will operate the TAPI pipeline; GAIL will be a prominent member of the consortium building and operating the 1,680-km line.

Sources said GAIL will pay Turkmengaz, the national oil company of Turkmenistan, on delivery of gas at Turkmen-Afghan border. Thereafter, the consortium which will have GAIL as partner, will take responsibility for transit of the gas through Afghanistan - one of the top high security risk countries in the world, and terrorism hotbed Pakistan.

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