April 19, 2018 / 10:18 AM / 3 months ago

Afghanistan's 30-year pipe dream could bring power, industry

KABUL, April 19 (Reuters) - Afghanistan is pressing ahead with plans to turn natural gas from an $8-billion pipeline into economic development, with projects ranging from fertilizer plants to power generation, but first it needs to start construction.

The TAPI pipeline - named after the countries involved, Turkmenistan, Afghanistan, Pakistan and India - was first proposed three decades ago. The problem of crossing war-ravaged Afghanistan is a major reason it has not been built.

Surveying work is finally underway in Afghanistan’s western province of Herat, with construction planned to start later in the autumn.

Obstacles loom, however, starting with convincing donors to fund Afghanistan’s 5 percent share of the cost and attracting private investors.

“They’re thinking, ‘Why a 30-year project that has not come into practice will be able to fully function in a few years?’ There is still that resistance, that maybe we will not be able to implement on time,” said Afghanistan’s acting minister of mines and petroleum, Nargis Nehan, in an interview.

The Taliban militant group has pledged support for TAPI, but security remains a concern.

TAPI will transport 33 billion cubic metres of gas a year along an 1,800 km (1,125 mile) route from Turkmenistan’s Galkynysh, the world’s second-biggest gas field, to Fazilka in northwest India.

Afghanistan’s share, 5 billion cubic metres annually, would meet a huge need for the country, which relies on imported electricity and faces frequent power shortages.

The Asian Development Bank (ADB), which is financing Afghanistan’s contribution to TAPI’s cost, and the World Bank are conducting for Kabul a feasibility study into generating electricity from the gas and using it to supply fertilizer and petrochemical plants, said Samuel Tumiwa, the ADB’s country director.

A gas distribution system in Herat, Afghanistan’s third-largest city, could also pipe gas directly to homes for heating and generate electricity for plants to process juice and nuts, he said.

“This opens up the possibility of Herat as an industrial city,” Tumiwa said.

‘IMMEDIATE RETURN’

The priority of Afghanistan’s government-owned power utility Da Afghanistan Breshna Sherkat (DABS), is producing power, and it is examining where it should build a power plant to convert TAPI gas, said the utility’s chief executive officer, Aman Ghalib.

Afghanistan could access additional gas from Turkmenistan during the early years of TAPI’s operation until the pipeline extends to Pakistan and India, Ghalib said.

TAPI is expected to start carrying gas by 2020, although the ADB’s Tumiwa said a later start was more realistic.

To utilize the gas, additional infrastructure, from gas mains to feeder lines and compression stations, may be needed, Tumiwa said.

Those costs plus Afghanistan’s share of capital would likely come from international donors, since the International Monetary Fund restricts borrowing.

The country also expects to collect at least $400 million in annual transit fees.

Kabul hopes to attract private investment, possibly including foreign fertilizer companies, Nehan said.

Unlike other projects in Afghanistan, TAPI will immediately generate revenue and gas when it starts operating, she said.

“This is a project where we see a very immediate return. From investment perspective, I think it is better that we focus on such projects.” (Reporting by Rod Nickel and Rupam Jain Editing by Robert Birsel)

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