India Considers $3 Billion Pipeline for West Asian Gas Supplies

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Researched by Industrial Info Resources (Sugar Land, Texas)--In an attempt to tap into gas supplies from the Middle East and western Asia to feed increasing domestic demand, India is considering the development of a $3 billion deepwater pipeline system across the Arabian Sea. South Asian Gas Enterprise Private Limited (SAGE), a private sector engineering and construction firm, has been working on the project for the past three years, and is reportedly in talks with Qatar and Iran regarding the supply of gas. INTECSEA (Houston, Texas), a part of WorleyParsons Limited (ASX:WOR) (Sydney, Australia) undertook a technical and commercial feasibility assessment of the project last year, and reported favorable results from the study.

The project envisages supplies of gas from Iran, Iraq and Qatar, which together hold gas reserves of about 2,000 trillion cubic feet. Gas from multiple locations in these countries would be transported to a gathering system on the coast of the Arabian Peninsula, from which undersea pipelines would traverse a distance of 1,000 kilometers across the Arabian Sea at a maximum depth of 3.5 kilometers to reach Gujarat or Maharashtra on the western coast of India. India would procure natural gas at market price, after payment of transit tariffs to SAGE. The transit tariff expected from the project is about $1.80 per million British thermal units. The cost of the project is estimated to be between $2.1 billion and $3.4 billion.

The route of the pipeline through the Arabian Sea would fall south of territorial waters and economic exclusion zones of all third-party nations, thereby ensuring geo-political stability. The proposed route is reported to have been extensively surveyed about 15 years ago. Subsequent to the development of enabling technologies since the mid-1990s, the deepwater environment is now assessed to be conducive to the proposed SAGE pipeline.

Although the number of pipelines under consideration has yet to be disclosed, each pipeline will reportedly have the capacity to transport 226.5 billion cubic meters of gas for a period of 25 years, equivalent to an annual transportation capacity of 8 billion to 9 billion cubic meters. Construction of the project is expected to be completed by 2014.

SAGE is an Indian private sector firm set up as a 50:50 joint venture between India's Siddhomal Group and Deep Water Technology Company, the subsea oil and gas well development subsidiary of DTC International Incorporated (Houston, Texas). The firm is working with a global consortium consisting of Heerema Marine Contractors Nederland BV (Leiden, Netherlands) and INTECSEA for the pipeline project. According to Subodh Kumar Jain, Director of SAGE, the firm had worked on the project in the 1990s, when the pipeline system was first proposed as a means of importing gas from Oman. However, Oman currently imports gas for its domestic needs.

Demand for gas in India has been rising rapidly, primarily because of the development of gas-fired power stations. Demand is expected to increase at an average annual rate of 6% in the coming years. According to the Statistical Review of World Energy, June 2009, provided by BP plc (NYSE:BP) (London, England), gas consumption in India is expected to increase from 41 billion cubic meters in 2008 to 54 billion cubic meters in 2013. However, India has not been very successful in setting up pipelines for gas imports. It is estimated that development of energy corridors could supply enough natural gas per pipeline to generate up to 8,000 megawatts of power and produce several million tons of fertilizers annually in the country.

The SAGE project is being viewed as an alternative to the $7.5 billion Iran-Pakistan-India (IPI) pipeline. Although the IPI pipeline project was introduced in 1994, the project has witnessed inordinate delays caused by tensions between India and Pakistan, leading to several years of inconclusive negotiations about gas and transit prices. Iran has suggested proceeding with the project without India's involvement. The country plans to hold talks with Gazprom OAO (MCX:GAZP) (Moscow, Russia) and Pakistani companies to develop the pipeline.

Jain informed the Financial Express that talks with Iran to supply gas through the SAGE deepwater pipeline were positive. Gas from the South Pars field, earmarked for transportation to India through the IPI pipeline, could be supplied through the deepwater pipeline. However, Hojatollah Ghanimifard, Director of International Affairs at National Iranian Oil Company (Tehran, Iran) has countered this statement and ruled out the possibility of such a transaction. Ghanimifard said that Iran would supply gas to India only through the IPI pipeline and not export additional gas to India through sea routes. As in the case of the IPI project, India is also likely to face pressure from the U.S., which is seeking to isolate Iran because of the country's uranium enrichment program. This is expected to cause severe delays in the SAGE pipeline project as well.

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