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Iran may put LNG deal on backburner

Iran may put LNG deal on backburner
PTI
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First Published: Thu, May 10 2007. 05 31 PM IST
Updated: Thu, May 10 2007. 05 31 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 Iran should supply 5 million tonnes 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 tonnes a year of LNG.
The June 2005 contract had LNG prices linked to 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 tonnes of LNG to $3.74 per mBtu.
Tehran was willing to honour the June 2005 price only if the additional 2.5 million tonnes 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 tonnes a year of LNG by Iran is legally complete and binding, and 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.
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First Published: Thu, May 10 2007. 05 31 PM IST