India’s efforts to broad-base its sources of energy by entering into exploration and production pacts of various sorts with other nations rich in hydrocarbons are welcome. But does engaging with a high-political-risk Iran offer us any reasonable degree of energy security?
Essentially, energy security entails not only supply security, but also price security. Where does Iran stand in this metric, in light of India’s recent gas strike in the Farsi block, the long-drawn negotiations on LNG contracts and the Iran-Pakistan pipeline? Past experience has been quite frustrating. Lack of commercial orientation in Iran has led to extensive delays, involving persistent review of pricing issues. And, what recourse does India have if supply commitments are not kept even after a deal is finalized? There’s little to celebrate on the discovery front, too. In the Farsi block, we merely have a service contract to extract the gas, but will have to buy it at market rates. So, the risks seem to outweigh the gains.