Why Transnational Energy Pipelines Remain Pipedreams in South Asia

Summary

The main aim of this paper is to bring out very clearly the “rationale for constructing transnational pipelines in the South Asian region, why pipeline projects are riddled with problems and finally whether anything can be done to address the issues that would make these projects less troublesome.”

The paper outlines the main constraints and challenges that hinder the growth and development of transnational pipelines, the chief among them being the fact that there is no overarching legal regime that can be used to resolve differences between nations and regulate activities and contracts. Also, the author points out that one needs to make a clear distinction between the oil and gas market because unlike the oil market, the gas market is more disaggregated and there are no benchmarks for gas and prices. For example, there is no talk about a world price for natural gas. This tends to encourage and rather allow host countries to make ad hoc changes in gas pricing, as was the case with the IPI project.

Conflicts and impediments in transcontinental projects are more often the result of politics due to or in the absence of legal and regulatory regimes. This is certainly the case in the Indian sub-continental context. The paper then goes on to illustrate the above claim by saying that in the face of India’s increased energy demands post liberalization, policy makers began looking at importing gas in the form of pipelines and LNG. Policy makers in neighbouring Pakistan too felt that increased demands would lead to an increase in imports despite its existing energy resources. These common demands by both nations led India to propose imports from Iran in the form of the IPI pipeline. But even after two decades of numerous negotiations, India’s participation seems unlikely for the time being. Various issues relating to pricing and the geo-politics of the pipeline in general has posed an impediment for India to sign the deal with Iran and Pakistan. To add to it, there is the American opposition to any deal that is to be signed with Iran and the fact that India is afraid that the gas supplies will be disrupted en route in Pakistan.

In the midst of various problems and issues that plague the development of pipelines in South Asia, the paper also very lucidly talks about the cooperation that can be possibly adopted to further cross-border energy trade in the region. A few suggestions include, the introduction and more importantly the implementation of the rules embedded in multilateral agreements in the 1994 General Agreements on Tariffs and Trade( GATT) under the World Trade Organization(WTO) or the Energy Charter Treaty (ECT), all of which could limit the repercussions of conflicting jurisdictions. However, the legal framework of the WTO has raised certain doubts regarding its export control regulations and whether they can address the members’ energy related concerns.

External Discussants: Dr. Bhupinder Kumar Singh & Mr. A. Karnatak

Dr. Karnatak focused on project monitoring in order to get over most hurdles that nations in the sub-continent encounter with regard to pipeline projects, as about 7 lakh crore pipelines projects are in the process of being materialized. He also said that Bangladesh need not be included in pipeline projects where India is also involved. Answering one of the questions that came from the floor as to why CNG is a preferred resource, he said that it is more feasible to have CNG beyond 3500 kilometres of a pipeline. He said that problems relating to terrain can be overcome but the geo-political situations across nations still pose a major hindrance in pipeline projects.

Dr. Singh was optimistic about the fact that in the long run the IPI pipeline would be a viable option as Pakistan will see the advantages in having Iran take responsibility for its part of the pipeline. Also, the view of having an active involvement of the ECT is a factor that needs to be taken into account and given due importance.

Internal Discussants: Dr. Meena Singh Roy & Dr. Smruti Pattanaik

One of the main points brought out by the internal discussants is that one needs to delve much more deeply into the internal politics of the countries as these are vital and critical in energy policy formulation. There is a need to put out a nation’s energy needs and calculate how much is being addressed and to look at whether trans-national pipelines can have international dimensions. The more recent problem of non-state actors also needs to be addressed in detail and the prospects of bilaterals and quadrilaterals and the level of their past successes and failures studied.

Discussion

The main issue focused upon by those commenting and asking questions from the floor was that of hindrance and interference of non-state actors. What are the remedial measures if and when pipelines are bombed and portions of them destroyed as has been seen in the past. This doubt was answered by the external discussants, who said that remedial measures have already been adopted and that damages can be taken care of in a matter of a few hours.

Prof. Sujit Dutta’s (the Chair) Summary

The chair concluded by saying that organizations like the ECT are very crucial and that one needs to always remember that India’s situation as compared to a power like China is very different when it comes to sheer ability to carry on energy trade agreements with other countries.