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India to sign pipeline contract with Turkmenistan

22nd May 2012

Indian oil giant, GAIL on Wednesday looks set to hash a deal with a Turkmenistan oil company to sale and purchase a new pipeline project

A new natural gas pipeline could stretch from India to Turkmenistan, avoiding Iran.

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 reports.

GAIL India Ltd. the nation’s biggest gas distributor, and TurrnenGas, Turkmenistan’s national oil company, plan to sign the agreement tomorrow, Bloomberg reported.

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 17 May.

The US, which plans to end its military presence in Afghanistan, backs the 1,680-kilometer 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 US supports this project but they’re in the process of pulling out of Afghanistan.”

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 17 May 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 per cent of the country’s average daily gas output in the year ended 31 March, 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 US 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.

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.