Created: 7/16/2002

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Trans-Afghanistan Gas Pipeline Proposal:onslarlcr

fcadcr* from TurkmcnistaA, Afghanistan, and Pakistan metuly to formaliT* plan*rans-Afghonoian gas pipeline thai will Dow from

I urkmen .sun's Daulotabod Fieldat liquefaction facility ji tbe Pakistan port of Gwmlur (ml.nstability in Afghanistan, combined withigh construction costs and competition from existing liquefied natural gas (LNG)ill put construction of5 pillion pipeline nut of reachecade or more.

Ah Old Proposal,ew Twist

Turkmen. Afghan, and Pakistani leaders are moving ahead on theiray agreement loeasibility study onkilomelcr pipeline to ship gai from the Dau lata bad field via Afghanistan to Gwadarere the gas would be exported as LNG. according to pressecond phase could include an additional gas pipeline to upon to India

odification of an earlier plan by Unocal toipeline to link inio Pakistan's gas pipeline system,eparate pipeline to India

(see map).

new plan avoids the polilical difficulties of accessing Ihe large India gas marfcel via Pakistan, but iiii' project is more expensive than the pirvious initiative due to its greater kngth and the need to build an LNG terminal.


Previous concerns about tbe di(licul:ies of constructing andas pipeline through Afghanistan are compounded by the high cost of


Three Countries. Three Sets of Motives

Turkmenistan is seekinger development ofresources and an export outlet ihai can freedependence on the Russian gas pipelinenow limits Turkmen gas export salesand other poor-paying customers inSoviet Union, according


The proposed pipeline isthan Ihe distance Daulaubad gaslo go if Russia were ever to giveto Ejropean gas

Afghanistan would benefit from transit fees on the order0 million per year, millions of dollars in one-time regional development outlays, plus continued employment and maintenance outlays, based on press and mdoslry discussions of the earlier il.

a Afghanistan abo would have the right to purchase some of Ihe gas for hs own use under the new agreement. I

piess reporting discussed annual shipnirnis of up loillion cubic meterslthough the inpattile agreement does not specify the amounts


Most industry press reporting deems the proposal not financially viable aad very unlikely lo attractr oral insesonenL

This report was prepared by the Office of Transnational Issues. Comments and queries arc welcomebe directed to the Chief,un


m# proposed Pant-Atghnnlstao pipohna route* an basad on gawal iotHat ana endpoum dtscutsati in oi) industry prats.

May Hap* for Gas Exports

Kabul may be hoping lo eventually use tlw pipelineow-eosi ouileixport some of iu own gas reserves. Development of oil is far ko likely. Gas production peaked aiem in, and oil produciion has been limitedarrels/day, accordingniernntk>nal energy statistics.

USGS study of Afghanistan's

geology, which also ourucd Afghanistan's

ultimately recoverable resourcesillion

barrels ofem of gas,illion

barrels of condensate

The fC>el of provedmall, and tbe ultimately recoverable reso-jrees will lake many years to explore and develop. The USCS assessment did not include an evaluation of their commercial viability By way of comparison. US proved reserves art about JO billion barrels of oil and condensaterillion cubic meters of gas, according to industry statistics.


to industry press, but Pakistan could purchase gas alter that, if future praepecls do not meet expectations.


Many recent press reports of ihe Turkmenistan-Afghanistan-Pakistan agreement have focused only on pipeline constniciion. citing costs ofnbouiillion. This was the publicly discussed cost of the Unocal-proposed pipeline link to Pakistan's gas pipeline network. The cunxni plan will cost for more.

The pipeline lo Gwadar isiles longer lhan the earlier proposed link inio ihe existing Pakistani gas pipeline grid, but more importantly, unlike the previous proposal, the new plan requires the construction of LNG liquefaction facilities in Gwadnr, as well as modernization and deepening of the port.

LNG facilities are very capital intensive. The gas liquefaction facilities forenVycarof gas from Indonesia's Tangguh field for example) are expected io cost S2 billion, according lo industry press reports.

Earlier security concerns about pipelines through Afghanistan ulso continue to trouble investors, according lo press reporting.

Market Competition Ahead

also would benefit from annual transit fees and from increased employment for pipeline construction and port modernization.

In addition. Islamabad will have Ihe right, according to the agreement, to purchase some of the gas to cover regional shortfalls or to export its own gas, if thereurplus.

Pakistan is self-sufficient in gas. and recent discoveries have extended its expectedufficiency for at least the nextears, according

All of these factors will make it extremely difficult for this gas to enter the highly competitive Asian LNG market, Esiabtished producers, including Australia. Indonesia, Malaysia, Brunei, Oman, and Qatar are already actively vying for places io the limited market, with more LNG facilities under construction. These exporters are generally exploiting large offshore or coastal gas fields wilhO facilities; no major pipelines ore necessary.

a Projects that are now under way in Iran, Indonesia, Malaysia, Australia, East Timor, and Qatar to

supplylhcG market, could produce u* much atem of LNG by ihe end of ihc decade.

NG project in Yemen.X) kilometers shorter lhan ihc DauLaiabad-Gwadar line and planned since the, is flounuVimg due lo ihc mabiliiy to find LNG buyers, according to industry press: US panicipants arc pulling out.

As ofhere was overem of idle LNG production capacity in the Middle East and Pacific region, according to industry press reporting.

No Pipeline Without Foreign Aid

The addition of an LNG plant more than doubles the cost of rhe earlier pipeline profect. from about J2 billion5 billion, based on discussions of other LNG facilityhe industry press. The project is not competitive with (he other LNG projects in the region, when the pipeline and LNG plant costs arc combined.

No commercial energy company will undertake the financing of such an expensive androved, and the coc runes themselves cannot afford to build an LNG plain without assistance.

Afghanistan, Pakistan, and Turkmenistan are counting on funding from ihe World Bank and other donors, according to press reporting and ihc project will only be built if billion* of dollars in grants ore made available. I " |

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