Iran, India fail to finalise gas deal

Thursday, 25 November 2004, 08:00 Hrs
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NEW DELHI: India and Iran have failed to reach an agreement for the supply of five million tonnes of liquefied natural gas (LNG), primarily on the issue of price, official sources said.

Petroleum Secretary S.C. Tripathi, Indian Oil Corporation Chairman M.S. Ramachandran and GAIL (India) Chairman P. Banerjee had gone to Tehran this week to negotiate the price as Iran has made purchase of gas conditional to award of exploration blocks to India.

"The situation has changed since six months back with oil and gas prices rising globally. We were not able to finalise the deal," an official source said.

"The next round of talks will be held during Petroleum Minister Mani Shankar Aiyar's visit to attend a seminar in Iran next month."

Though Iran's law does not permit oil equity, India is keen to tie up exploration and service contracts with it to get assured supplies of oil and gas as payback.

India is keen to get a 30-year fixed contract on the lines of a deal struck with Qatar at the rate of $2.53 for a million British thermal units (mBtu).

Any price higher than that would have few takers in the price sensitive Indian market, the sources said.

To make the offer more attractive, Iran has offered almost a whole exploration block to India if an agreement is reached for off take of 7.5 million tonnes of LNG as against five million tonnes of LNG a year as is currently being discussed.

"Iran has offered 20 percent stake in Yadavaran, which has potential to produce 300,000 to 400,000 barrels of oil an annum, under a service or buyback contract," a source said.

"But in case we agree to take 7.5 million tonnes of LNG, Iran has offered to give more than 50 percent or even full stake in a smaller field at Juffair."

The detailed feasibility study of both projects is still to be done, but India's share is expected to be $1.25 billion of a total estimated investment of $5 billion for both projects.

"India is still weighing the options between the pipeline route and the LNG. Currently, the cost implications seem in favour of the pipeline," the source said.

"But much will depend on transit charges. As of now nothing has been finalised," the source said.

Source: IANS
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