Expert says don’t buy Qatar-Iran gas

Fereidun Fesharaki, an international energy expert and former energy advisor to the Iranian prime minister, feels the significance of the over decade-old proposal for India to import natural gas from Iran through a multi-billion-dollar pipeline is fading with domestic gas reserves, as in Reliance Industries Ltd’s D6 Block, looking robust.

Fesharaki, chairman of Hawaii-based oil and gas consultancy Facts Global Energy, says the price of gas from Iran or even Qatar, will be too expensive to compete with new sources of domestic gas available within the country.

He said India should instead wait for a year or two to let the global
gas market turn in favour of buyers.

Energy-hungry neighbours India and Pakistan have been pursuing Tehran for laying a 2,135-km pipeline to import gas from fields in southern Iran.

The $7 billion project is, however, yet to progress beyond the drawing board over issues such as pricing of gas and security concerns in transportation through Pakistan. Initially, Iran had sought a price of $3.2 per mBtu. In 2007, it was revised to $4.93 per mBtu, benchmarking it to price of crude oil at $60 a barrel.

Last year, Tehran hiked the price to $8.3. Adding delivery cost, it would be close to $9.5 per mBtu at the Indian border.

“Iran gas is hugely expensive. At crude price of $75 a barrel, it will be well over $9 per mBtu at Iran-Pakistan border. At the Indian border, it will be around $12-13 an mBtu,” Fesharaki said.

On the contrary, even the costliest gas from domestic source is priced $5.7 per mBtu from the Panna-Mukta-Tapti fields offshore Mumbai. D6 Block gas is capped at $4.2 per mBtu on crude oil price of $60 a barrel and above.

Fesharaki said even the volume of gas to be supplied through the Iran-Pakistan-India pipeline is limited. “The amount of gas (to be supplied through the pipeline) is fixed at one-third of D6 volume, and that will again be divided between India and Pakistan.”

Petroleum secretary, S Sundareshan, had last week said that India, the second fastest growing economy in Asia, is expected to achieve self-sufficiency in natural gas in the next couple of years.
Fesharaki feels India should not go for an agreement with Qatar hastily, for importing additional liquefied natural gas (LNG) as global prices are expected to ease over a year-and-half.

“What I get to understand is that Qatar is seeking a price of around $11 per mBtu. I think the deal can be done at half this price. India should just wait for some time,” he said.

Qatar, world’s largest exporter of LNG, has agreed to supply 4 million tonne per year additional LNG to India from 2013.

However, these supplies would hinge on India’s ability to pay a higher price.

Qatar energy minister, Abdullah Hamad Bin al-Attiyah, on a visit to Delhi earlier this week, had said some of the LNG contracts have the provision of diverting cargoes to other buyers, provided new buyers are ready to pay more.

India’s Petronet LNG Ltd currently imports 7.5 million tonne LNG from Qatar under long-term basis.

Besides Qatar, there are other LNG projects coming up around the world, especially in the Asia-Pacific region.

Fesharaki said, with LNG capacity additions taking place and demand offtake declining due to the economic slowdown, an inevitable glut in LNG is in the offing.
NW18