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Iran says $22 billion deal to sell 5mtpa LNG to India is dead

Iran says $22 billion deal to sell 5mtpa LNG to India is dead
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First Published: Sun, Nov 16 2008. 09 44 PM IST

Scrapped pact: A file photo of an Iraninan refinery complex. Iran has the world’s second largest oil and natural gas reserves. Jeff Kowalsky / Bloomberg
Scrapped pact: A file photo of an Iraninan refinery complex. Iran has the world’s second largest oil and natural gas reserves. Jeff Kowalsky / Bloomberg
Updated: Sun, Nov 16 2008. 09 44 PM IST
New Delhi: Iran says it has scrapped a $22 billion deal to sell 5 million tonnes per annum (mtpa) of liquefied natural gas, or LNG, to India due to a dispute over prices and lack of required approvals.
The deal was signed in 2005 between National Iranian Gas Export Co., or Nigec, and Indian companies GAIL (India) Ltd, Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd.
Iran later demanded a higher price than the $3.215 per million British thermal unit (mBtu), to which India raised objections.
Scrapped pact: A file photo of an Iraninan refinery complex. Iran has the world’s second largest oil and natural gas reserves. Jeff Kowalsky / Bloomberg
“The deal is dead because the whole arrangement was based on the clause that unless the National Iranian Oil Co’s (NIOC) board of directors approve the deal, it will not be approved. The board of directors did not approve it,” an Iranian government official told Mint in New Delhi. The official didn’t wish to be named as he is not authorized to speak to the media. “It was just a primary agreement signed between Nigec and three Indian companies. Though on record the talks are still on, for all practical purposes the deal is off.”
NIOC is the parent company of Nigec.
“Recently, there have been some positive developments after the Iran visit of our external affairs minister,” said a top official in India’s ministry of petroleum and natural gas, who also didn’t want to be named. “Discussions will again take place for the LNG deal. These are international negotiations and nothing can be said until it is formally communicated to us.”
External affairs minister Pranab Mukherjee was in Tehran recently to attend the meeting of the India-Iran joint commission, which promotes bilateral cooperation.
The proposed $7.4 billion Iran-Pakistan-India pipeline project is also expected to fall through, even as Iran faces economic sanctions by the US and its allies over its nuclear programme, which Washington suspects is aimed at developing nuclear weapons but Teheran says is designed to produce electric power.
“While Oman is negotiating with Iran to import gas for converting it into LNG to re-export it in the international market, India wants to import gas from Oman at a higher price than Iran. There is some pressure from the West on India,” the Iranian government official claimed.
India imports 7.5 mtpa of LNG in spot markets, which is sourced by Petronet LNG Ltd and Shell India Pvt. Ltd.
Iran has the world’s second largest oil and natural gas reserves. India is short on natural gas that is expected to last till 2012—the country needs at least 180mscmd of gas, and the supply is at 81mscmd. India imports some 12mscmd of gas bought in spot markets. State-owned NTPC Ltd, the country’s largest power generation utility, is in talks with Iran to buy 5 mtpa of LNG as reported by Mint on 12 November.
“Had India been able to secure the deal even at $5 per mBtu, it would have been a great deal. However, not converting it into an assured supply at current crude prices, will be a big miss,” said Prayesh Jain, an analyst at stock market research firm India Infoline Ltd.
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First Published: Sun, Nov 16 2008. 09 44 PM IST