Iran wonآ’t go below $2.22 per mmbtu LNG for India

Vol 8, PW 9 (28 Jul 04) People & Policy

Indias determination to buy cheap LNG from Iran is unlikely to materialise.

Despite Indias best efforts and bargaining skills, Tehran is unwilling to sell LNG to India below $2.22 per mmbtu FOB. Iran believes its price of $2.22 per mmbtu is cheaper than LNG from RasGas for which Petronet-LNG is paying $2.53 per mmbtu FOB.

An Indian oil ministry team including officials from GAIL and Indian Oil is scheduled to visit Tehran later this month to continue detailed negotiations following a visit earlier this month to Delhi by a high-level Iranian delegation led by deputy oil minister Nejad Hosseinian. Let us continue the negotiations and see how far they are willing to come down, says a GAIL source.

Privately, GAIL believes Tehran wont come down further. The Iranians are very firm on their price, reveals a source.

They know that the Indian market can bear the price they are quoting. We understand the Indian side, led by GAIL, wants to deliver Iranian LNG to domestic customers at between $3 and $3.5 per mmbtu.

Iran has made it clear there is no scope for any further price reduction from its side. The Iranians tell us we should cut customs duty and local taxes and not keep pressing them for more reductions.

Iran is also conscious that if it goes below $2.22 per mmbtu for India, it will be cutting the throat of other LNG suppliers in the region and it does not want to do this. Another factor weighing with Tehran is the growing demand for LNG from the US and European markets where the Henry Hub price for gas is $5-6 per mmbtu.

Iran is confident there are enough takers for its LNG, we are told. In contrast, India will remain short of gas even if all the present domestic discoveries are exploited.