India still needs Iran gas link via Pakistan

India still needs Iran gas link via Pakistan

By Reuters

Barcelona: India still needs Iran to build a gas export pipeline across Pakistan for the long term, although its demand is set to drop, an executive from Indian importer Petronet LNG said on Wednesday.

Indian demand for imported gas is likely to fall sharply in the next two years as domestic production rises and demand wanes, Amitova Sengupta said.

Sengputa, finance director at the joint venture set up by the Indian government to import liquefied natural gas, said that security concerns rather than discussions over price were the main obstacle facing the $7.6 billion project.

“I don’t think that price is a major concern," he told reporters on the sidelines of the CWC World LNG Summit in Barcelona. “The major concern is Pakistan sitting in between."

But Sengupta said last month’s attacks in Bombay, blamed on Pakistan-based militants, had not significantly changed an already difficult security risk facing the project.

“We know that Pakistan doesn’t have control over the tribes through which the pipline will pass," he said, adding that Iran’s refusal to guarantee delivery as far as the Indian border was a major sticking point.

Sengupta told the conference that Indian demand for LNG would fall sharply in 2009-2010, partly because of the economic slowdown but also because of rising domestic gas production and competition from other fuels.

“India is going to be a very soft market for LNG," he said, adding that demand for the fuel could rise from 2011 and that the economic slowdown was less important than rising India gas output.

“It’s not a major factor," he said of the crisis.

If the problems over security are resolved soon, work on the Iran-India pipeline may start next year and could be finished by 2012.

The pipeline is expected to initially transport 60 million cubic metres of gas (2.2 billion cubic feet) daily to Pakistan and India, half for each country. The pipeline’s capacity would later rise to 150 million cubic metres.