Neglected Iran resists India cheap gas demand

Vol 19, PW 17 (05 May 16) Midstream & Downstream

Feeling neglected by Narendra Modi, Iran is resisting Indian pressure to supply gas at $2/mmbtu delivered for 20 years to proposed Indian petrochemicals and fertilisers factories at the upcoming Chabahar tax-free Special Economic Zone.

Indian oil minister Dharmendra Pradhan made this demand to Iranian counterpart Bijan Namdar Zanganeh during his April 9 and 10 visit to Tehran and Chabahar port; it will be repeated when Narendra Modi visits Iran from May 21 to 23. But there's a growing sense the Iranians are unhappy Modi has not bothered to visit them until now, even though he took charge as PM in May 2014.

Also they feel the Indians are being rather cheeky asking for gas at $2/mmbtu when local industrial consumers in Iran pay anything between $3.5 and $4/mmbtu. India argues that its proposed $20bn investment at Chabahar will create hundreds of local jobs and should not be treated like other industrial investments.

The Indian delegation also stressed that the US Henry Hub benchmark is around $2.2/mmbtu and might fall further. Iran was also reminded of India's willingness to clear $6.5bn to Iran for oil imports, which it hoped would make a good impression.

If Iran agrees to the $2/mmbtu price, Indian authorities will bring together state-owned and private players to invest jointly at Chabahar.