Gas pipeline from Iran is still very much on the agenda

Vol 10, PW 16 (30 Nov 06) People & Policy

Expect similar hard bargaining between India and Iran over the price of gas from the proposed overland pipeline through Pakistan.

PETROWATCH learns the Singapore office of Gaffney Cline & Associates is ready with a draft pricing report commissioned jointly by the three countries. We expect to receive the report any day, reveals a source.

When it reaches their desks, experts from India, Pakistan and Iran will consult the draft report and make suggestions allowing GCA to submit its final report a week later. During the last trilateral meeting in Delhi officials, agreed to benchmark the gas price to the long-term LNG price in Japan.

Says a Tehran source: When the Japan LNG price was $4 per mmbtu, India and Pakistan wanted pipeline gas at $2.25 per mmbtu. When the LNG price was $6 they wanted us to give them a price of $4.

Now the Japan LNG price is $8 per mmbtu. If India and Pakistan want to import pipeline gas from us they should be realistic and have a real price in mind.

Adds our source: The price should be affordable to all three countries or there will be no deal. Once the final GCA report is submitted and the gas price agreed, a Joint Working Group of bureaucrats will meet in the first week of December in Tehran to lay the groundwork for a meeting between the energy ministers of Iran, India and Pakistan.

No decision has been made on who will lay the pipeline but, many discussions have taken place and three options have emerged. One, Iran lays the pipeline from South Pars to the Pakistan border; Pakistan then lays the pipeline to the India border, where India takes over.

Two, appoint a co-ordinator to implement the first option. Or three, set up a consortium to lay the pipeline from Iran to the Indian border.

Who owns the gas till the Indian border No one knows but it is a minor issue that can be addressed through the Brussels-based Energy Charter and its safeguards for trans-national gas pipelines.