How South Asia Can Benefit from Central Asian Energy Boom?

Posted on 09/8/13
By Ikram Sehgal | Via The News International
Long oil train on its way to Russia transporting oil from Kazakhstan. (Photo by Duccio Aiazzi, Creative Commons License)
Long oil train on its way to Russia transporting oil from Kazakhstan. (Photo by Duccio Aiazzi, Creative Commons License)

In a rare assembly of representatives of governments of countries in South and Central Asia, parliaments and the private sector as well as experts from China, the US and Europe sat in Islamabad on September 1 and 2 to discuss not the security challenge but the energy promise that the region offers.

EastWest Institute (EWI), a leading American think-tank, organized the event, says Ikram Sehgal in an article published in The News International, a leading daily in Pakistan.

It was one of very few conferences organized by an AMerican think-tank in the Pakistani capital. (Photo via EastWest Institute)
It was one of very few conferences organized by an AMerican think-tank in the Pakistani capital. (Photo via EastWest Institute)

According to the ‘Global Economic Prospects’ report, South Asian regional growth declined from 7.4 percent in 2011 to an estimated 5.4 percent in 2012, mainly due to a sharp slowdown in India. Home to many of the developing world’s poor, the economic future of the region depends upon regional cooperation bringing about the Asian Century, supporting regional networks to promote cooperation and focusing on trade in goods, services, electricity, people-to-people contact, and cooperation in water resource management. 

The aim of the event was to identify productive opportunities for economic growth based on Afghanistan’s potential as a transit route for energy supplies from Central Asia to energy markets in South Asia.

Energy transit routes are of crucial importance for the mutual benefit of both exporting and importing states. Analysts cautioned about barriers in using Afghanistan as an energy route, the civil war and political instability making possible routes insecure. Not only a historical but a natural trade corridor, it has a great potential for economic growth.

Energy trade can be an influential tool for economic integration in South Asia for it being home to one-fifth of humanity. Sehgal identifies Iran-Pakistan gas pipeline (IP), the Turkmenistan-Afghanistan-Pakistan-India gas pipeline (Tapi) and Central Asia South Asia (CASA)-1000 as the three most important projects in this sector. He says private sector involvement in energy sector can mitigate the risk on non-recovery of cost of import. But transportation of Central Asian oil and gas to energy starved South Asia and China through Afghanistan remains a big challenge. The transportation may remain a far cry till the return of stability in Afghanistan, something little expected by even the most optimistic Afghan watchers.

A booming energy and drug trade has transformed Ashgabat, Turkmenistan’s capital, into a glittering metropolis. (Photo by Hemra, Creative Commons License)
A booming energy and drug trade has transformed Ashgabat, Turkmenistan’s capital, into a glittering metropolis. (Photo by Hemra, Creative Commons License)

Sartaj Aziz, a key aide to Prime Minister Nawaz Sharif, was one of the high-profiled government officials who showed up at the conference. He reiterated Pakistan’s interest in the trans-national gas pipeline but cautioned against too much optimism.

Political disturbances and civil war can be a setback to development as in the case of Tapi, but its construction will certainly be undertaken once the situation gets better.  Dr Frederick Starr from Johns Hopkins University was thrilled at Pakistan’s determination to go ahead with Tapi. One of the early proponents of the Tapi pipeline, Dr Starr said, “Obviously, serious challenges will remain, the greatest of which will be to design the project (Tapi) so that it is viable in free-market terms. Doubts abound, but there are now sober optimists as well”.

The conference gave a rare opportunity to discuss the immense energy trade potential of Central Asia, which is set to become one of world’s top five oil producers within the next decade. Sehgal says Kazakhstan, ranking 15th in the world for proven gas reserves, became a net gas exporter in 2009.

Astana, the capital of Kazakhstan, is known for its flowers and architecture. Oil boom has transformed the city into a world class tourist destination.(Photo by Ken and Nyetta, Creative Commons License)
Astana, the capital of Kazakhstan, is known for its flowers and architecture. Oil boom has transformed the city into a world class tourist destination.(Photo by Ken and Nyetta, Creative Commons License)

Uzbekistan is planning a major expansion of its domestic electricity infrastructure. It plans to raise $3.5bn between 2009 and 2014 to finance the increased capacity by around 2,700MW. Turkmenistan holds the world’s fourth largest reserves of natural gas amounting to 7.504 trillion cubic meters. Kyrgyzstan and Tajikistan are less attractive to investors in terms of fossil fuel reserves.

Experts discussed the opportunities and challenges in harnessing the energy resources in central and South Asia and how the countries of the region could cooperate for mutual benefit. Some experts referred to Pakistan’s immense potential in energy sources development.

A recent study by the Energy Information Administration based on a study done by Advance Resources International (ARI) has estimated Pakistan’s recoverable shale gas at 105 trillion cubic feet (tcf) – up from 24 tcf. Oil estimate have increased dramatically 30 times from 300 million barrels to 9.1 billion barrels. In contrast, India is estimated to have 96 tcf and 2.7 billion barrels of oil recoverable from share oil reserves.

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In a rare assembly of representatives of governments of countries in South and Central Asia, parliaments and the private sector as well as experts from China, the US and Europe sat in Islamabad on September 1 and 2 to discuss not the security challenge but the energy promise that the region offers.

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