Date:24/07/2006 URL: http://www.thehindubusinessline.com/2006/07/24/stories/2006072402190300.htm

Back Pricing issue looms over IPI pipeline project

Richa Mishra

Iran demands $7.2 per mmBtu against offer of $4.25 mmBtu

Crucial issue
Iran is linking the gas price to global crude oil price trend, which is considerably higher than India's domestic price
According to India, the prices have to be moderated as the supply proposed is for 20-25 years and the volume envisaged is very large

New Delhi , July 23

The trilateral talks scheduled for August 3-4 between Iran, Pakistan and India on the multi-billion dollar gas pipeline project is set to see some tough negotiation between the three nations on the gas pricing issue. With Iran declining to sell gas to India at the price proposed by New Delhi, and India reluctant to revise its offer much, there is apprehension in the Petroleum Ministry that the pricing issue would be crucial to deliberations on the project.

"If things are not resolved at the secretary-level meeting we may have to go to a higher level," official sources told Business Line. India and Pakistan would try to impress upon Iran to soften its demand for $7.2 per million British thermal unit (mmBtu) gas price. Iran is linking the gas price to global crude oil price trend, which is considerably higher than India's offer of $4.25 mmBtu at its border with Pakistan, official sources said.

Joint price

In fact, the initial gas price offered by Pakistan was much lower than India's but now both countries have decided to align the offer price, official sources said. "Iran's expectation on price seems unsustainable in the long-term", they added. Considering that the supply proposed is for 20-25 years and the volume envisaged is very large, the prices have to be moderated, official sources pointed out. India's requirement is expected to be 90 million standard cubic metre of gas per day (MMSCMD) from Iran while Pakistan is seeking up to 60 MMSCMD.

Unresolved issue

Iran's Oil Minister, Mr Kazem Vaziri-Hamaneh, earlier this month indicated the price proposed by India and Pakistan is based on their domestic prices. Even at the last secretary level talks in Islamabad on May 22-23, the issue of pricing remained unresolved.

Both India and Pakistan are keen to get the gas at an affordable price and feel that the price offered by them is fair and not reflective only of the domestic price trend.

Asked whether the 5 million tonnes liquefied natural gas deal would also be discussed at the meeting, sources said that it was not on the agenda of talks scheduled for next month.