Iran-India energy cooperation opens new horizons

Last month, Turkmenistan began construction of an ambitious $7.6 billion pipeline to export natural gas to India via Afghanistan and Pakistan. The project, known as TAPI (Turkmenistan-Afghanistan-Pakistan-India), will supply 33 million cubic meters of gas per day to India through a 1,814-kilometer (1,127-mile) pipeline. If finished on schedule, it is slated to become operational by the end of 2019.

Some energy analysts see the long-delayed launch of TAPI as the death knell to the stalled Iran-Pakistan-India (IPI) project, which — similar to TAPI — has seen years of planning and negotiations and was supposed to supply India with almost the same amount of natural gas per year.

Despite the failure of IPI, Iran’s ambition to export natural gas to the Indian subcontinent is alive and well. Indeed, in the same week that Turkmenistan announced the start of TAPI’s construction, Indian and Iranian officials resumed serious negotiations to jumpstart a giant project to export Iranian natural gas to Oman and India via an undersea pipeline. This development has been preceded by months of increasingly intense discussions.

In August, the chairman of the Confederation of India Industry’s northern region, Shreekant Somany, at a joint meeting with the Oman Chamber of Commerce, said that the undersea project with the Iranians should be expedited. Then, in November, the head of the National Iranian Gas Export Company, Alireza Kameli, told Iranian media that Tehran is in serious negotiations with New Delhi to construct such an Iran-India pipeline. Two weeks later, on Dec. 9, Iranian Foreign Minister Mohammad Javad Zarif met with his Indian counterpart, Sushma Swaraj, at the Heart of Asia conference in Islamabad. The two discussed the possibility of expanding their countries’ mutual economic cooperation, particularly in regard to Iran exporting natural gas to India. Subsequently, on Dec. 28, the Iranian minister of economic affairs and finance met with Swaraj and signed a 73-article agreement to expand bilateral cooperation, and particularly in the field of energy.

The $4.5 billion project to pump Iranian natural gas to India envisages the export of 31.5 million cubic meters a day via an undersea pipeline originating from Chabahar Port in southeastern Iran, traveling through the Sea of Oman to Ras al-Jafan on the Omani coast, and after traversing the Arabian Sea, ending at Porbandar in South Gujarat in India. The project, known as the Middle East to India Deepwater Pipeline (MEIDP), is slated to be completed in two years. According to Subodh Kumar Jain, director of South Asia Gas Enterprise Pvt. Ltd., which came up with the idea of an underwater project, the 1,200- to 1,300-kilometer pipeline is the best energy option for India. Iran, which has already started building a pipeline from Turkmenistan to its Chabahar port, has plans for a gas swap with Turkmenistan and to then export the gas to India via MEIDP. New Delhi has already agreed to finance and develop Chabahar Port in preparation for this arrangement.

India has strong incentives to engage in serious energy cooperation with Iran, which holds the world’s second-largest natural gas reserves. Experts say India’s natural gas demand will double to 517 million cubic meters a day by 2021. Indeed, energy analysts estimate that India will become the world’s second-largest energy consumer sometime in the next 30 years. Under such a scenario, MEIDP could help India satisfy a significant portion of its increasing hunger for natural gas. India could also save about $1.50 to $2 per million British thermal units once liquefied natural gas (LNG) imports are replaced by gas supplied through MEIDP; this would result in a significant windfall.

MEIDP holds several benefits, including security incentives. For instance, TAPI traverses Afghanistan and Pakistan before reaching India. The current security situation in Afghanistan is not encouraging, especially after the recent clashes between government forces and the Taliban, in addition to the confrontations between the Islamic State and the Taliban and local tribes. This situation has made India feel the need for a more secure route — and the undersea MEIDP is the best option. Moreover, MEIDP bypasses Pakistan, too. Although the TAPI route runs south of the unstable South Waziristan tribal agency in Pakistan, there is no guarantee that al-Qaeda-affiliated groups and Pakistani Taliban won’t attack the pipeline. TAPI also would go through Balochistan province, which has been hit by severe clashes between Pakistani government forces and Balochi nationalist militia ever since Pakistan’s founding in 1947.

MEIDP would also help India diversify its energy supplies. While supply diversification is universally sought, it has become even more urgent among energy consumers after the recent clashes between Russia and Turkey. Once Russia imposed sanctions against Turkey as a result of the downing of a Russian warplane, the Turkish government started to negotiate with Israel, Qatar and the Kurdistan Regional Government in Iraq to replace Russia, which supplies 57% of Turkey’s natural gas imports. Similarly, the Trans-Anatolian Natural Gas Pipeline is a project that attempts to reduce European countries’ dependency on Russian gas. It appears that India has learned from Turkey's and Europe’s lessons and is trying to avoid over-reliance on a single supplier.

MEIDP can also usher in other, non-energy benefits, such as increased trade. For instance, thanks to MEIDP — with its associated development of Chabahar Port and the linking of Chabahar to Turkmenistan via railway — Iran, India and Turkmenistan alike can expedite their trade with Central Asia without needing to use the Bandar Abbas railway, and at a faster and cheaper rate.

Finally, MEIDP would not only be mutually beneficial to Iran and India, but also to their common friend on the Arabian Peninsula: Oman. In 2009, Iran signed a memorandum of understanding to build an undersea gas pipeline to export gas to Oman. On March 12, 2014, this memorandum was upgraded to a preliminary agreement between the two countries to build a 200-kilometer undersea pipeline worth $1 billion. This project is expected to be finished in 2017 and would facilitate the export of about 10 billion cubic meters of gas to Oman annually. Of note, a September 2008 agreement signed between Tehran and Muscat stipulates that Oman will convert part of Iranian natural gas imports to liquefied natural gas and export it to world markets. Although the 2008 agreement focused on gas supplied from Iran’s Kish Island in the Persian Gulf, it could be expanded to the Iranian gas exported via MEIDP. Oman currently has an LNG facility and imports gas from Qatar via the Dolphin pipeline. Muscat hopes that after MEIDP enters the operational phase, besides the increase in Oman’s revenue as a result of tariffs and exports, it will have more gas for its growing domestic use, and particularly for its power generation sector. Moreover, Oman could also use a portion of its income from MEIDP to cover its budget deficit.

In conclusion, while TAPI may sound the death knell to the IPI project, MEIDP is a promising initiative that would help secure mutually beneficial energy cooperation between Iran, Oman and India, and also paves the way for the expansion of broader trade and diplomatic cooperation — not only between the Middle East and the Indian subcontinent, but also with Central Asia.