India
Iran may put the $22 billion deal to sell liquefied natural gas (LNG) to India on the backburner as New Delhi refuses to re-open the contract sealed two years ago.
Updated : Nov 19, 2013, 11:17 PM IST
NEW DELHI: Iran may put the $22 billion deal to sell liquefied natural gas (LNG) to India on the backburner as New Delhi refuses to re-open the contract sealed two years ago, according to an assessment by the petroleum ministry.
In a report to the Prime Minister's Office on his meeting with Iranian President Mahmoud Ahmadinejad last month, Petroleum Minister Murli Deora said Tehran has assured it was committed to the Iran-Pakistan-India pipeline project and the LNG contract on equal terms.
But the ministry's assessment was Iran would prioritise the IPI project and continue to push for a renegotiation of the LNG deal on the price or will put in on backburner, Deora said in the report.
Sources said Deora told Ahmadinejad that Iran should supply 5 million tons a year of LNG at the June 2005 agreed price of $3.215 per million British thermal unit (mBtu) and New Delhi was willing to pay a higher price for an additional 2.5 million tons a year of LNG.
The June 2005 contract had LNG prices linked the Brent crude oil price with a cap at $31 per barrel. Now Iran wants to raise this ceiling to $55, raising the LNG price to $4.78 per mBtu.
India, sources said, has offered it is willing to pay $4.78 per mBtu for additional LNG, thereby averaging the cost for 7.5 million tons of LNG to $3.74 per mBtu.
Tehran was willing to honour the June 2005 price only if the additional 2.5 million tons bought at $7.92 per mBtu, so as to average the price to $4.78 per mBtu.
Deora, however, said reneging on the LNG contract by Iran would signal a setback not only for the energy relationship between the two countries but would also be a dampener on the prospect of Indian private sector participation in other
sectors of the Iranian economy.
The agreement signed in June 2005 for supply of 5 million tons per annum of LNG by Iran is a legally complete and binding contract, which should be honoured, he said in his report.
Ahmadinejad's expression, during his meeting with Deora, for finding a middle way, had given a renewed, albeit faint, ray of hope to an otherwise hopeless position of the LNG contract, he added.