Reuters: Differences persist between India and Iran over the price of gas that would flow through a proposed pipeline, with Tehran wanting a higher return, but both countries said they remained committed to the project.
By Unni Krishnan
NEW DELHI (Reuters) – Differences persist between India and Iran over the price of gas that would flow through a proposed pipeline, with Tehran wanting a higher return, but both countries said they remained committed to the project.
After a round of talks in New Delhi, officials from India, Pakistan – through which the pipeline will pass – and Iran formed a nine-member committee to try to narrow their differences and arrive at a deal on Friday.
India and Iran have been discussing the $7-billion pipeline for months but pricing has proved the main sticking point.
“We are very confident. I am sure some way can be found and one of the approaches which we have agreed upon is that a team of experts composing people from all delegations will go through the proposal, basically on pricing,” the top bureaucrat in India’s petroleum ministry, M.S. Srinivasan said.
The pipeline was first proposed more than a decade ago, but progress has been slow because of hostility between India and Pakistan and, more recently, U.S. opposition to Iran over its controversial nuclear programme.
An Indian oil ministry official said Iran had offered a formula of 10 percent of the average Brent crude price plus a fixed cost of $1.2 per million metric British thermal units, which India and Pakistan consider expensive.
COSTLY GAS
At present prices, the Iranian proposal would mean the two South Asian countries paying $8 per mmBtu, the official said. New Delhi has offered a far lower $4.25 per mmBtu.
“The price of the seller is about twice (that which) the buyer is asking for,” Iran’s Deputy Oil Minister Mohammad Hadi Nejad-Hosseinian said.
“The price we are asking is fair and just. We have a report saying that it is a good price for India and Pakistan.
Iran has the second-largest natural gas reserves in the world behind Russia – about 940 trillion cubic feet – while growing Asian economies, including India and Pakistan, are scrambling to find energy sources to feed industrial expansion.
The work on the pipeline, likely to begin in the middle of 2007, is expected to be completed by 2012 to meet growing demand from India and Pakistan, estimated at 50 billion cubic metres a year.
Pakistan officials said they agreed with India’s view on pricing and found the Iranian offer expensive.
“Both of us as buyers of gas have similar views on what the realistic price should be,” said Mukhtar Ahmed, energy adviser to Pakistan’s prime minister, Shaukat Aziz.
India has had to tread a tightrope in the pipeline talks, trying to satisfy its appetite for hydrocarbons while not upsetting Washington. It faces a natural gas deficit of 200 million cubic metres a day in 20 years.
India has reached a landmark civilian nuclear cooperation deal with the United States that is intended to boost the country’s nuclear power capacity as a way to meet soaring energy needs.
The deal is currently being reviewed by U.S. legislators amid criticism it would reward India with nuclear technology and fuel while the country refuses to sign the Nuclear Non-Proliferation Treaty and has conducted nuclear tests.
Experts say the agreement would allow India to produce nuclear weapons easily because it frees up domestic supplies for military use.
