BAKU, Azerbaijan, August 14. On August 10, Chairman of Turkmenistan’s Halk Maslahaty (Parliament) Gurbanguly Berdimuhamedov paid a working visit to Afghanistan, where he held talks with Deputy Chairman of the country's government for economic affairs Abdul Ghani Baradar. One of the central issues discussed was the implementation of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, including its key Afghan section, Serhetabat-Herat.
During the visit, the sides discussed further progress on the project, transport and energy infrastructure, and the need for closer coordination between relevant agencies. The results of construction work on the Serhetabat-Herat section were presented on site. In addition, state concern Turkmengas and Afghan Gas company signed a memorandum of understanding on supplies of Turkmen gas to Herat province.
The importance of TAPI is currently driven primarily by the need for additional and more diversified natural gas supplies in South Asia. The project is designed to deliver up to 33 billion cubic meters of gas annually from Turkmenistan to Afghanistan, Pakistan and India, with the Galkynysh field serving as its resource base.
For India, the project is particularly important amid long-term growth in gas demand and the need to expand its import base. In its January analytical article "Turkmen gas for Asia: the role of TAPI," Trend had already examined these processes, noting that rising gas consumption in India, combined with growing geopolitical uncertainty around maritime energy supplies, could increase the country's interest in TAPI. The current situation can therefore be viewed as a continuation of that trend, which has gained additional momentum amid growing vulnerabilities in global energy markets. Against this backdrop, an overland route from Central Asia to South Asia gains additional value for consumer countries because its operation does not depend on tanker shipments passing through the Strait of Hormuz.
At this stage, TAPI faces another issue - a commercial one. On August 10, as part of Gurbanguly Berdimuhamedov's visit to Afghanistan, state company Afghan Gas and Turkmengas signed a memorandum on gas purchases, but the sides still need to determine the price, demand volumes and the mechanism for allocating supplies. On the same day, Abdul Ghani Baradar called for a long-term agreement on the gas price and urged the sides to adjust the pricing formula so that sharp swings in European gas markets would have less impact on the cost of supplies. He also proposed including a flexible mechanism for revising the contract.
To understand the logic behind this request, it is important to look at how gas prices are formed in Europe today. The key benchmark is the Dutch Title Transfer Facility (TTF), Europe's main gas trading hub and the continent's principal gas price reference. Prices there are shaped by wholesale supply and demand, with trading covering day-ahead deliveries as well as monthly, quarterly and longer-term contracts. Since 2022, however, the European market has become much more dependent on the global liquefied natural gas (LNG) market: LNG's share of EU imports rose from 20% in 2021 to 45% in 2025. As a result, TTF prices are increasingly influenced by competition between Europe and Asia for LNG cargoes, the availability of tanker supplies, global infrastructure and geopolitical risks.
This feature of the European market may create a potential problem for Afghanistan. A price linked to a rapidly changing external market can respond to events that do not directly alter the gas balance in South Asia. In 2026, this became particularly visible amid the crisis involving Iran and the Strait of Hormuz: reduced LNG availability and stronger competition between European and Asian buyers triggered another wave of volatility in European gas prices. A report by the European Agency for the Cooperation of Energy Regulators (ACER) titled "Key Developments in European Gas Wholesale Markets (Winter 2025–2026)" notes that in 2026, this was particularly evident against the backdrop of the crisis in the Middle East and disruptions to supplies through the Strait of Hormuz. According to the European Agency for the Cooperation of Energy Regulators (ACER), TTF prices rose above €50 per MWh at the start of the crisis and exceeded €60 per MWh following damage to energy infrastructure. At the same time, Asian gas premiums reached record levels, intensifying competition for flexible LNG supplies.
Such volatility is particularly significant for Afghanistan. The country would serve both as a gas consumer under TAPI and as a transit link along the route, meaning that gas costs would affect both domestic energy supply and the economics of transit. Against this backdrop, Baradar's request can be viewed as an effort to limit the transmission of external price shocks into a long-term contract. Historically, TAPI has already envisaged a formula-based pricing approach relying mainly on oil indexation; no publicly available documents confirm that the current formula is directly linked to TTF.
The issue, therefore, appears to be about finding a more predictable pricing structure for TAPI. This could involve a longer pricing reference period, mechanisms for smoothing short-term spikes or a hybrid formula with predetermined conditions for revisions. It remains unclear which approach Afghanistan will propose and what terms Turkmenistan will accept: the August 10 memorandum leaves these parameters open.
The European model has nevertheless proved effective as a mechanism for building an integrated wholesale gas market. TTF's high liquidity, large number of market participants and ability to quickly redistribute gas between regions allow prices to respond rapidly to changes in supply and demand. This gives the European market a common gas price reference and helps it adjust quickly to changes in supply. However, the same characteristics can produce a different result in a project built around a long-term pipeline contract and a limited number of participants. In such case, excessive sensitivity to short-term external market movements can create additional uncertainty for the buyer, particularly when its own market is much less liquid and offers fewer tools for managing price risk.
The future TAPI pricing formula could therefore potentially evolve toward a mechanism that takes long-term supply parameters into account while allowing for predetermined price adjustments when market conditions change significantly. This could involve an averaging period, several price indicators, limits on the scale of price changes or other mechanisms already used in international gas trading. It is not yet clear which approach the sides will choose, so it would be premature to speak of a new regional pricing system. However, the TAPI pricing debate shows that, in developing a long-term gas market between Central and South Asia, the parties may face the need to adapt existing international mechanisms to the specific characteristics of regional demand.
Similar adjustments are already taking place in other markets. In 2024, Indian companies Petronet LNG and GAIL India, major state-controlled players in the country's gas import and trading sector, concluded long-term contracts with lower oil price linkages of around 12-12.5%, compared with roughly 13-14.5% in agreements signed in 2022-2023. This allowed buyers to reduce the impact of oil price fluctuations on the final cost of gas.
At the same time, Asia is developing its own LNG price benchmark, the Japan Korea Marker (JKM), which is used to assess LNG supplies to Northeast Asian markets. However, JKM and Europe's TTF remain closely connected: according to the International Energy Agency, their correlation reached 0.955 in 2025, while changes in the price spread affect the direction of LNG flows between Europe and Asia.
The structure of LNG contracts is also changing. According to international consulting firm McKinsey, around 70% of surveyed LNG buyers plan to use long-term and short-term contracts simultaneously over the next two to three years, seeking to combine greater price predictability with flexibility.
Against this backdrop, a possible adjustment of the TAPI pricing formula fits into a broader process of adapting gas contracts to changing market conditions. Buyers continue to use international price benchmarks while seeking to account more closely for regional characteristics and limit the impact of sharp external price swings.
The gas pricing issue shows that, as TAPI progresses, the project's focus is gradually shifting toward its commercial model. For Turkmenistan, this is a matter of monetizing a new export route, while for Afghanistan it concerns long-term access to gas and predictable costs. Kabul's intention to revise the formula in light of external price volatility can therefore be viewed as an effort to establish terms better suited to the economic conditions of the region.
At the same time, a potential adjustment of the TAPI formula fits into a broader process already visible in the global gas market. Buyers in different regions are revisiting the structure of long-term contracts, using multiple price benchmarks and seeking greater flexibility. Asia is developing benchmarks such as JKM, while companies are adjusting oil indexation and the balance between long- and short-term purchases. Against this backdrop, a possible revision of the TAPI pricing formula can be viewed as part of a broader adaptation of gas contracts to new market conditions and changing price risks. Buyers continue to rely on international price benchmarks while seeking to better reflect regional characteristics and limit the impact of sharp external fluctuations. If the sides develop a mechanism that takes into account the specific conditions of the Central and South Asian markets and reduces the impact of external price shocks, this experience could also be relevant to other regional gas projects.
