Gas pricing dams Indo-Iran pipeline flow

Price of gas and project structure of the pipeline continue to be contentious issues in Tehran and New Delhi talks on transporting natural g...

Price of gas and project structure of the pipeline continue to be contentious issues in Tehran and New Delhi talks on transporting natural gas from Iran to India through Pakistan.

Both were adamant at the third meeting of the Special Joint Working Group today with Iran demanding a price mechanism linked to the present price of crude oil. Tehran refused to consider Indian options of pricing gas at those in Iran or linking to the price agreed between the two for 5 million tonnes of LNG in June this year. “Variation between Iranian offer and India’s demand would be close to $ 4 per mBtu,’’ said an Indian company official present during the talks. Iran’s offer price would range at $6.5 per mBtu while India’s demand is estimated at $2.5 per mBtu.

The two differed widely on pipeline building as well. While India pushed for construction by a consortium of international firms and national oil companies of the three countries, Iran favoured a system where each country would take care of its pipeline segment in collaboration with global firms. India’s concern is that safety of the pipeline will be in danger if it is built in sections and handled by each country.

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“Downstream investment will be highest in India, and to protect the projects there has to be back-to-back system in which the trio are involved,’’ said the official. Petroleum Secretary S C Tripathi and Iran’s Deputy Petroleum Minister for International Affairs M H Nejad Hosseinian also discussed the framewrok agreement for which Tehran has yet to provide inputs.

A three-nation pact will be important for fixing project structure and defining obligation of each country, he added.