All we know is that it will be 30% cheaper than LNG

Vol 8, PW 24 (09 Mar 05) People & Policy

We might not know the exact price of piped natural gas from Iran but one thing is clear: it will be cheaper than Iranian LNG, possibly 30% cheaper.

Late last year India agreed to import 5m t/y firm and 2.5m t/y optional LNG from Iran over 25 years beginning 2009, subject to a ceiling price of $3.10 per mmbtu FOB. Talks between Iran and India about LNG continue in parallel with the overland pipeline, thanks to oil minister Mani Shankar Aiyar and his vision of a pan-Asian pipeline stretching from South Pars through Pakistan to India and eventually to China.

On 5th and 6th March, GAIL led a team from India to Tehran for more discussions. Both LNG and pipeline gas options are being discussed simultaneously, a source from the Indian team tells us.

The pipeline option is at a preliminary stage and this was the first working level meeting to discuss it. We want to gauge the Iranian understanding of the pipeline project.

We learn both sides have agreed to most of the items in the Term Sheet for LNG imports to India and a contract could be signed as early as July. But Tehran advises caution on the LNG project amid growing hopes for an overland pipeline.

If India wants to take a decision purely on economic and commercial criteria, it should choose the pipeline, reveals a source. But if a decision is to be made on political grounds then the LNG option is preferable.

Iran wants India to take the pipeline option for obvious reasons: its cheaper. How much cheaper No fixed numbers are available because only a pre-feasibility study has been completed, we learn.

But pipeline gas would be at least 30% cheaper than LNG. India is aware of the cost advantages of piped gas but is still pursuing the LNG option with Iran.

We can sell the LNG anywhere, adds a source. It need not be brought to India.