Indo-Iran gas pipeline faces tech, financial hurdles

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New Delhi, March 21: Notwithstanding the pressures being exerted by the United States, serious differences exist between New Delhi and Tehran on important technical and financial issues pertaining to the import of natural gas from Iran through a pipeline via Pakistan. These relate to pricing, quantity, gas specifications as also on introducing legal clauses such as ‘supply or pay’ in the contract.

Also, the report submitted by the additional secretary, ministry of external affairs, Talmiz Ahmed on the visit of the Indian delegation to Iran (on March 5 and 6) clearly indicates that there are still many hurdles to be crossed.

According to senior government officials, New Delhi will take a tough stand on these commercial issues at the next meeting of the Indo-Iran joint working group in Tehran towards the end of April. "Brainstorming sessions have started in the ministry to prepare ourselves on all these issues. Views of legal experts are also being sought," an official said.

On pricing of pipeline gas, the Iranians are linking it with the price of regassified-LNG (R-LNG). As against this, India has suggested working out the gas price on actual cost considerations which means taking into account the actual wellhead price coupled with cost of transportation, transit fee and other related costs.

"The advantage of this working will be that all different elements in price build-up would be visible in a transparent manner. Besides, R-LNG and piped gas prices are simply not comparable considering the costs and quantities involved in two projects. Also considering the geo-political issues in laying the pipeline, such a proposal would be saleable only if there is an appreciable price difference between the delivered gas price vis-a-vis R-LNG price," the official added.

Even globally, piped gas is preferred over the LNG on account of cost benefits. Also as the agreed LNG contract is for a limited quantity meant for the end-users who can afford the suggested price, the LNG price cannot be construed as the market price of gas in India.

In addition, the composition of gas proposed by Iran for exports to India is not acceptable. While Iran wants to sell lean gas, India is pressing for import of gas in its natural composition ie as it exists in the well gas. Iranians want a higher price for richer gas.