Afghan 'pipe dream' draws closer to reality

Back in the days of the Taliban, Mir Sediq was an engineer for Unocal, working on a pipe dream: bringing natural gas from Turkmenistan down through Afghanistan to Pakistani ports on the Arabian Sea.

Today, Mr. Sediq is minister for Afghanistan's energy, mining, and industrial sector, and he's confident that the pipeline is coming close to reality.

Driven by a Pakistani economy growing at nearly 7 percent a year and higher energy prices, the pipeline, on paper, is the closest thing to a win-win scenario as one can find in Central Asia. For Pakistan, expected to run out of its own reserves in five years, the pipeline will help sustain growth. For Turkmenistan, it helps to provide a market for its substantial gas reserves. And for Afghanistan, it could mean from $200 million to $350 million per year in transit fees.

In the rough parlance of oil industry executives, that beats a kick in the head.

"This pipeline is an opportunity for Afghanistan, and we would like to keep Afghanistan a place that is open and attractive for foreign investment," says Sediq. "The foreign investment rate of return is 17.5 percent, based on the assumptions that the gas reserves in Turkmenistan are enough and the consumption rate in Pakistan remains high. Only security of the pipeline is left, and the government of Afghanistan is capable of providing security."

It wasn't so long ago that the pipeline was thought to be dead. Taliban attacks in the south appeared to be on the increase, and other sources of energy, such as Iran or Qatar, were more attractive. But growing Pakistani demand, increased Afghan stability, and higher energy prices for Turkmenistan have made the pipeline increasingly feasible. This week, President Hamid Karzai told donor countries the project was a top priority - on a par with the war on terror and opium eradication.

As yet, there are no foreign investors vying for the project, but talks between Turkmenistan, Afghanistan, and Pakistan are proceeding. In mid-April, the three countries and the Asia Development Bank held their eighth round of meetings to hammer out details of what Turkmenistan has, how much gas Pakistan needs, and whether Afghanistan is safe enough. The next round comes in July, but Sediq is expected to travel to the Turkmen capital of Ashkabad Friday to see if the government's survey of reserves will be finished in time.

"The biggest question is certification of gas reserves in Turkmenistan," says Mary Louise Vittelli, an adviser to the Afghan Ministry of Mines and Industry. "We need to know if there is enough gas for the next 30 years. There are lots of pipelines in countries where there is war, so security is a question, but not a deal breaker. [Y]ou can have all the security you want, but if the price is five times higher than getting gas from Qatar, then the deal is broken."

When first proposed back in the early 1990s, the Turkmenistan-Afghan-Pakistan pipeline (nicknamed TAP), was planned to be roughly 1,100 miles long. The Afghan portion would have been 466 miles long, much of it following the Herat-Kandahar road.

Now, Afghan officials and foreign engineers are exploring a possible route across the northern provinces and through Kabul.

If started Today, the pipeline could be completed in seven years. That comes two years too late for Pakistan, which is running out of reserves.

While Pakistan has doubled its energy output since 1999 - to 4 billion cubic feet per day - its roaring economy is expected to deplete gas reserves by 2010. By 2015, it will need to buy 2.5 billion cubic feet per day from abroad.

"We cannot sustain our economic growth if we don't get additional energy," says Ahmad Waqar, Pakistan's secretary for petroleum and natural resources. "We need gas."

In all likelihood, Pakistan will need more than one pipeline project. Pakistan is negotiating with Qatar and Iran over separate projects. The Qatari pipeline is the most politically stable, but it has technical problems. The Iranian pipeline - which would distribute gas to both India and Pakistan - is technically the simplest. But it faces substantial US opposition, as US law precludes giving a government contract to a US company doing business with Indian or Pakistani firms working on the Iranian pipeline. Both India and Pakistan are so desperate to find gas that they are working together as joint customers on the Iranian pipeline.

The TAP pipeline is expected to cost $3.8 billion, and create hundreds if not thousands of jobs for Afghans. Afghan officials say that it might be one of the first projects to generate revenue for the state.

"There is the opportunity to create 3,000 Afghan jobs for 30 years," says Sediq. Hiring local labor will help increase security, he adds. "When they are the part of the project, they will not let anyone attack it."