Turkey offers oil pipe lifeline to India by Sudha Ramachandran

Turkey offers oil pipe lifeline to India
By Sudha Ramachandran

BANGALORE - Turkey has offered - during a visit by Foreign Minister Ali Babacan to India this month - to facilitate the supply of oil to India from Central Asia via Israel through a combination of overland pipelines and super tankers.

Under the plan, oil transported through Turkey's extensive pipeline infrastructure from Central Asia to its Ceyhan port would be sent across the Mediterranean Sea by tanker to Israel's port of Ashkelon. There it would be fed into Israel's Ashkelon-Eilat 254-kilometer pipeline. From Eilat port, again by tanker, it would be sent through the Gulf of Aqaba and the Red Sea via the Gulf of Aden and the Arabian Sea to India. Neither Israel nor the US have commented on the proposal.

The Turkish offer holds out the promise of a well-established route
by which energy-hungry India could access Central Asian reserves, in contrast to less-practical alternatives.

India imports about 70% of its oil requirements, a dependence that may increase to over 91% by 2020. About 45% of present needs comes from the Gulf Cooperation Council countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - according to Indian Planning Commission figures, and if one includes oil imports from other parts of the Middle East, the region accounts for about 67% of India's oil imports.

India, anxious to reduce this dependence on the Middle East for its fuel, given the political volatility of the region, is looking to Myanmar and Vietnam in its more immediate neighborhood, Sudan and Nigeria in Africa, and Turkmenistan in Central Asia to secure oil and also gas supplies.

The success of those efforts have been mixed. It won significant stakes in Russia's Sakhalin I oilfields, but lost out - often to China - in bids for assets in Nigeria, Kazakhstan, Myanmar and Canada over the past two years. No less easy have been India's efforts to clinch oil pipeline deals.

A plan to bring gas from Myanmar, to the east, by pipeline through Bangladesh fell apart when Dhaka wanted India in return to agree to a free-trade corridor to Nepal and to remove existing trade barriers between India and Bangladesh. It also demanded what India saw as exorbitant transit fees. India now hopes to route a pipeline from Myanmar that bypasses Bangladesh, running through India's northeastern states before reaching Kolkata.

If the pipeline to India's east has been a non-starter, a plan for one to its west - the Iran-Pakistan-India (IPI) pipeline - is looking almost as tenuous. Strongly opposed by the US because of Washington's differences with Tehran, the US$7.5 billion IPI pipeline also faces difficulties over Iran's pricing of the oil and transit fees demanded by Pakistan.

The prospects of a $4 billion Turkmenistan-Afghanistan-Pakistan (TAP) project are slightly brighter, if only because it is backed by the US and international financial institutions. India was invited to join the project last year. On the down side, Turkmenistan, whose total gas output is about 60 billion cubic meters (bcm), recently agreed to increase gas deliveries to Russia's Gazprom to about 50 bcm. That would leave little gas for transport through the TAP pipeline, making it an unviable proposition.

In this context, Turkey's offer to India has considerable potential - at least the pipelines that might bring Central Asian oil to India already exist. The 1,768-kilometer Baku-Tbilisi-Ceyhan pipeline, which carries a million barrels of oil a day from Azeri and Kazakh oil fields and the Caspian Sea - the world's third-largest oil and gas reserve - to the Turkish Mediterranean port of Ceyhan, has been in operation since 2006.

The Ashkelon-Eilat pipeline, also known as the Trans-Israel pipeline or Tipline, has been functioning for several years. Built in 1968 to transport oil from Iran - then under the Shah - to Israel, it was largely unused except to carry transshipments of Egyptian oil. In other words, it carried oil from the Red Sea to the Mediterranean. The direction of the flow was reversed a few years ago when Russia began transporting oil through Israel's overland pipeline. It was then picked up by tankers that traveled through the Gulf of Aqaba and the Red Sea to Asian markets.

Using the Ashkelon-Eilat pipeline and the Gulf of Aqaba would let India's supplies skip the Suez route, with several advantages.

Israeli ports, already supplied by super tankers, accommodate larger vessels than those that can pass through the Suez Canal, and tariffs for the Ashkelon-Eilat pipeline are lower than those charged by Egypt for shipping through the Suez, itself a more congested route than the Gulf of Aqaba. Costs could fall further if a proposed undersea pipeline connecting Ceyhan with Israel goes ahead. Babacan said in Delhi that a feasibility report on the project will be conducted soon.

Making Ankara's offer even more attractive to India is that the pipelines involved do not run through Pakistan and are not at risk of being disrupted in the event of a souring of India-Pakistan relations.

A supply deal with Turkey would extend India's links with both that country and Israel. The Indian Oil Corporation has picked up a 12.5% stake in a pipeline from Turkey's Black Sea port of Samsun to the Ceyhan pipeline, while India's ties with Israel have already deepened dramatically over the past decade or so.

Securing oil for the pipeline deal is another matter. India's ambitions to win stakes in the oilfields of Central Asian countries have so far outpaced its achievements.

OMEL, an Indian joint venture of state-run ONGC-Videsh Ltd, the overseas arm of Oil and Natural Gas Corp (ONGC) and Mittal Energy Ltd, has been looking for stakes in Kazakhstan, Turkmenistan and Azerbaijan. These are at different stages of progress and a finalization of any deals remains elusive.

In Kazakhstan, after losing to China in 2005 in its effort to buy a Canadian company, PetroKazakhstan, that had stakes in Kazakh oil fields, India is now eyeing a stake in the Satpayev oil block in the Caspian Sea. The Kazakh government is said to be willing to sell 50% to OMEL, with Kazakh national company KazMunaiGaz (KMG) holding the balance.

The Indian Mittal group last year acquired Russian oil firm Lukoil's 50% stake in Caspian Investments Resources for $980 million. The acquisition was initially proposed to be done by OMEL. Mittal has since said that it will transfer the assets to OMEL but ONGC officials are skeptical that it will do so.

In Azerbaijan, Tata Petrodyne Ltd, a wholly owned subsidiary of India's Tata Sons, has linked up with state refiner Indian Oil Corporation and exploration firm Oil India Ltd to make a bid for a 51% stake in Shivran Oil Operating Company held by Caspian Energy Group (CEG). Shivran runs the Kyurovdag oil field in Azerbaijan. Earlier, OMEL failed with a $300 million bid.

In Turkmenistan, OMEL has acquired a 30% stake in Block No 11 and 12 in the Turkmen sector of the Caspian Sea. Other stakeholders in the block are the Danish company Maersk Oil (36%) and the German company Wintershall 34%.

Sudha Ramachandran is an independent journalist/researcher based in Bangalore.

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