30 Nov : India has proposed to invest USD 6.5 billion to develop gas fields in Iran and sought more liquefied natural gas (LNG) from that country.
At the same time, India asked Iran to honour the 2005 LNG import deal and ensure secured supplies of gas through the Iran-Pakistan-India pipeline.
In the first high-level contact in two years, India told the visiting Iranian Deputy Oil Minister and National Iranian Oil Co (NIOC) Managing Director, Seifollah Jashnsaz, that it was keen to buy 5 million tonnes of LNG a year besides the ones signed in 2005, sources said.
India also asked Iran to give the ONGC Videsh-led group rights to develop the gas field it discovered in the offshore Farsi block.
It sought 20-25 percent stake for the overseas investment arm of Oil and Natural Gas Corp (ONGC) in the Phase-12 of the gigantic South Pars gas field in the Gulf.
Sources said Jashnsaz was told to honour the 2005 LNG agreement which NIOC had previously blocked, saying the gas price in the signed deal was too low.
On the USD 7.4 billion Iran-Pakistan-India gas pipeline, India said it was willing to be part of the project provided Iran guarantees safety of the pipeline in Pakistan.
India said it would take delivery of the gas on the Pakistan-India border rather than the proposed sale point at Iran-Pakistan border, sources said, adding this way Iran would be responsible for passage of gas in Pakistan and will have to bear losses if the pipeline is disrupted.
Sources said India wanted NIOC to give OVL 20-25 percent stake in the USD 7.5 billion South Pars Phase-12 (SP-12).
It also wanted NIOC to expedite the award of development rights for the Farzad-B gas field in the Farsi block to the consortium of OVL, Indian Oil and Oil India Ltd.
The three firms have submitted a USD 5 billion development plan for the field. India wants LNG for its efforts in both the fields.
Sources said a consortium of GAIL India, IOC and BPCL had on 13th June 2005 signed an agreement with National Iranian Gas Export Co (NIGEC) for import of 5 million tonnes a year of LNG.
A side-letter indicated that NIGEC was to obtain the approval of its parent firm, NIOC, which has not come.
Tehran has been seeking a higher LNG price which New Delhi has opposed saying the LNG contract was a legally binding document and can not be re-opened.
As per the formula agreed in 2005, Iran was to charge India 6.5 percent of the Brent crude oil price at the time of loading of each consignment plus a fixed price of USD 1.2 per mmBtu. The price according to this formula was capped at USD 3.215 per mmBtu at USD 31 a barrel Brent price.
Iran, however, wants the ceiling raised to USD 65 a barrel at which the gas price would come to USD 5.425 per mmBtu.
Sources said New Delhi was willing to pay no more than USD 4.75 per mmBtu for the LNG and has also opposed Iranian demand for assignment of the contract to private firms like Essar Oil in case its proposed price was unacceptable.
Besides the issue of delivery point, Iran has jacked-up the price of gas to be sold through the IPI pipeline.
Iran, which had originally priced its gas at USD 3.2, had in 2007 revised the rates to USD 4.93 per mmBtu at USD 60 a barrel crude oil prices, which was accepted by India.
Sources said Iran has now changed the formulation that would mean India paying USD 8.3 per mmBtu at oil price of USD 60 a barrel.
Added to this would be a minimum of USD 1.1-1.2 per mmBtu towards transportation cost and transit fee that India would have to pay for wheeling the gas through Pakistan, they said.
Sources said India has rejected the changes as unilateral revisions was against the spirit of stable contract regime.
Issues like frequent revisions in prices and terms made by Iran have delayed finalisation of the agreement on the IPI pipeline which should have become operational in 2010 if things would have gone as agreed in 2005.
Sources said the previously agreed formula of charging 6.3 percent of the the 10 month average of Japanese Crude Cocktail plus a fixed USD 1.15 per mBtu has now been changed to 12 percent of JCC plus USD 1.1 per mBtu fixed cost.
Iran, they said, was not willing to commit to a supply-or-pay regime wherein it would have been held accountable for non-delivery of gas at the Indian border.
It, however, wants New Delhi to commit to a strict take-or-pay clause wherein India would have to pay even if it does not take deliveries.