TAPI Gas Pipeline Project: India and Pakistan Agree Transit Fee Formula

At a bilateral discussion between the Indian Minister of Petroleum and Natural Gas, S. Jaipal Reddy, and Pakistan's Federal Minister for Petroleum and Natural Resources, Asim Hussain, in New Delhi on Wednesday, both nations have reportedly "agreed to settle the Transit Fee issue at the earliest".

"Since there is a need to expedite the signing of the Gas Sale Purchase Agreement (GSPA), both sides agreed to settle the Transit Fee issue at the earliest" said a statement released by the Indian government.

The agreement concerned the fee payable to Pakistan for the 38 mmscmd of gas expected to flow through the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Gas Pipeline Project. The parties also agreed, keeping in mind the landed cost of gas and the overall economics of the project, to conduct negotiations in a transparent manner.

The statement also said Pakistan had agreed, in principal, to accept the fee formula that would be decided on between India and Afghanistan, as long as the formula was subject to the approval of their competent authority.

The two representatives also discussed various matters relating to bilateral cooperation in the hydrocarbon sector and trade in petroleum products.

Reports suggest the Indian Petroleum Minister has offered to export petrol, diesel, aviation turbine fuel and fuel oil, in addition to sulphur, polyethylene and polypropylene to their neighbors. The Pakistan camp could view this offer as an advantageous one, since it will save freight costs. India has several refineries located in close proximity to the border between the two nations.

The discussions also considered the Indian refineries' willingness to consider product pipelines to Pakistan, provided long-term guarantees for product off-take would be given by the Pakistan government.

Finally, concerning the India-Pakistan Joint-Working Group (JWG) on Petroleum & Petrochemical Products, a recently constituted panel to investigate specific details of facilitating trade in the relevant sectors, reports suggest "apart from G2G efforts, both sides agreed on the need to activate industry and business associations in the petroleum sector for confidence building".

The Indian Minister then informed his Pakistani counterpart that the former's oil companies would be participating at the "India Show", scheduled to be held in the Pakistani city of Lahore between Feb. 11 and Feb. 13. The trade show is being organized by the Government of India and the Federation of Indian Chambers of Commerce and Industry (FICCI), to showcase the strength of India's petroleum refining sector and what Indian oil companies can offer Pakistan.