For more than 20 years India has been trying to negotiate purchase of gas through transnational pipelines with countries like Qatar, Iran, Turkmenistan, Myanmar and Bangladesh. So far not one pipeline has been built. Not even one is on the drawing board. During these times many transnational gas and oil pipelines, which were considered technically and geopolitically impossible, have been constructed. When there have been such successes, why did India fail? Can we learn some lessons from them to take corrective steps? India's demand for gas is limited by supply. India's economy can consume enormous amount of gas which is relatively environmentally friendly. India can easily absorb more than 197 to 240 BCM by 2030 according to the Integrated Energy Policy Report. However, our domestic production is unlikely to be more than 100 BCM under the most optimistic projections. Thus there has been an urgent need to secure gas supplies.

Baku-Tbilisi-Ceyhan oil pipeline, which commenced operations in 2005 to transport oil from Caspian region to Mediterranean is one of the most celebrated transnational pipelines of recent years. There were many alternatives like moving crude from Baku in Azerbaijan to Novorossisk in Russian Black Sea port by having parallel pipeline to the existing one. Similarly parallel pipelines to the existing pipelines to move crude oil from Baku to Georgian port on the Black Sea could have been constructed despite the potential problem of Bosporous and Turkish objections. Oil could have been transported from Caspian region to Iranian sea port which would have been more economical .

China’s concern for energy security…

China has been discussing plans to build a pipeline to transport gas from Turkmenistan to China since mid 1990s. Because of the huge investment needed to construct such a pipeline and also some doubt on the actual proven gas reserves in Turkmenistan, many experts felt that it would never be built. However, Chinese have started to construct this pipeline which transits through Uzbekistan and Kazakhstan. This would start functioning in 2010 carrying 30 to 40 BCM. Despite all the obstacles and what was considered as doubtful economics, China, driven mostly by geo-political and energy security considerations, decided to undertake this project. In this pipeline there is no involvement of any of the international financial institutions and China has been able to finance the pipeline.

On 24 May Iranian President Mahmud Ahmadinejad and his Pakistani counterpart Asif Ali Zardari signed an agreement to construct a pipeline to transport gas from South Pars to Pakistan, despite the US sanctions. Gazprom of Russia has shown keen interest to join these efforts. This Iran-Pakistan pipeline, which has been under discussion for a very long time may finally get built.

Russian involvement will help Gazprom the interest in the Iran-Pakistan gas pipeline (IPGP) may give some advantage to and facilitate India getting gas without having to depend upon the goodwill of Pakistan. Russia can buy gas from Iran and transport it through IPGP and then sell it to India at Pakistan-India border. Pakistan may for geopolitical reason can disrupt gas supplies if Iran was supplying it directly to India. If it is Russian gas though with the final destination to India, Pakistan may think twice before disrupting it. Also, the US may have less problem with Russia buying gas from Iran than India going against the US sanctions and buying it directly from Iran. Thus we can get the cake and eat it too.

India is a non-starter…

When we take a look at India's past efforts to construct transnational gas pipelines, most of the factors which have supported the above mentioned transnational pipelines are missing. There is no denying the fact that the government has fully realized the strategic need to import gas from India's neighbours. But such an understanding has not been complemented with creative energy to come up with entrepreneurial solutions.

Despite having several high level committees to study Indian gas market which have recommended the liberalisation, the government has not been able to liberalise the gas market. Gas prices are closely controlled by the government to favour some sectors. This kind of market interference has prevented private companies to take interest in transnational gas pipelines. Even the public sector oil and gas companies are not interested in these pipelines since such gas pipelines may become white elephants in the absence of market pricing.

Another missing factor is the lack of experience, understanding of international gas markets and intricacies involved in transnational gas contracts on the part of petroleum ministry involved in developing alternatives to import gas. Petroleum ministry is led by senior IAS officers, often with no background in oil and gas industry. Even before one can gain understanding of the complex negotiations involving transnational gas pipelines they are likely to retire or move to other departments. Under such circumstances no one is held accountable for failure to develop gas contracts. The prevalent Indian culture of juniors/subordinates not expressing their opinion against their superiors even when they have better solutions, works against finding solutions to the problem of importing gas.

US sanctions against Iran should not be a deterrant

The US sanction against Iran investments has been one of the major obstacles for Nabucco and also for India. Still, India could have imported gas by manufacturing fertilizer in Iran, for example. When US companies started to invest in Azerbaijan, they managed to get waiver against helping it despite having strong opposition from the Armenian diaspora. If, a totally US-dependentally, Pakistan, can sign a contract with Iran, India should have been able to move confidently to bring gas from Iran. Therefore, the US sanctions cannot be given as an excuse for our failure.

Having failed to secure pipeline gas contracts, India should have adopted the strategy of importing gas in the form of LNG. Here also India has been slow to act. There is no long term thinking about how to develop LNG infrastructure. Again this is also hindered by the fact that gas market is not liberalised and there is no effective lobby for liberalisation of the gas market.

Form separate company for transnational gas pipelines...

Since there is no accountability for not developing a pipeline project in the ministry, no one wants to take the risk of signing a complex long term contract. In the absence of market-driven forces, responsibilities are shared among so many government agencies. It will be useful and, perhaps may even be necessary, for the government to form a new company with the specific goal of importing gas through transnational pipelines. Such a company, even headed by an IAS officer, should have a board consisting of a few business

leaders and technocrats with experience in the energy sector. Such a company will have accountability and also provide greater flexibility to develop projects with speed.

So far India has failed to develop international pipeline projects despite having good diplomatic relations with neighbouring countries with rich gas reserves. Problems like civil war situation in Pakistan and Afghanistan or lack of interest on the part of Bangladesh to sell gas or allow transit for Mynmar Gas are cited as deterrents. But in the examples given above, there were considerable geo political factors; still they succeeded whereas India has not been able to sign even a single gas contract to import gas through pipelines. It is time India thinks of out of the box strategies to bring to fruition some transnational gas pipelines.