Iran hikes price of natural gas coming through IPI pipeline
New Delhi, Feb 22: Iran has jacked-up by 20 per cent the price of natural gas that is to flow through the long- delayed Iran-Pakistan-India pipeline, making it the most expensive fuel in the country.
At the current crude oil price of USD 40 a barrel, Iranian gas will cost New Delhi USD 5.9 per million British thermal unit at Iran-Pakistan border, sources said.
Iran, which had originally priced its gas at USD 3.2, had in 2007 revised the rates to USD 4.93 per mBtu at USD 60 a barrel crude oil prices, which was accepted by India.
Sources said Iran has again changed the formulation that would mean India paying USD 7.1 per mBtu in the likely event of oil prices rising to USD 50 and USD 8.3 per mBtu if oil price was to touch USD 60 a barrel.
Added to this would be a minimum of USD 1.1-1.2 per mBtu towards transportation cost and transit fee that India would have to pay for wheeling the gas through Pakistan, they said.
Gas from the Panna/Mukta and Tapti fields in Mumbai offshore fetches the maximum USD 5.70 per mBtu, while Reliance Industries' Krishna Godavari basin gas has been priced at USD 4.20 per mBtu if crude oil price was USD 60 or more.
Sources said New Delhi was likely to reject the changes, which were conveyed by Iranian chief negotiator H Ghanimi Fard to Indian Ambassador to Iran last month, 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.
The latest move by Iran, which holds the world's second largest gas reserves, may have been triggered by the drastic fall in international crude oil prices which have dived from USD 147 a barrel in August 2008 to below USD 40 now.
As per the previously agreed formula of charging 6.3 per cent of the the 10-month average of Japanese Crude Cocktail (JCC) plus a fixed USD 1.15 per mBtu, the gas price at the current crude oil price would have come to USD 3.67 per mBtu.
So the formula has now been changed to 12 per cent of JCC plus USD 1.1 per mBtu fixed cost, sources said, adding, this would be the price of gas at Iran-Pakistan border.
Sources said Iran was not willing to commit to a supply- or-pay regime wherein it would have been held accountable for non-delivery of gas at 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.
Iran has also ignored New Delhi's demand for a trilateral Bureau Report mechanism for securing delivery of gas at Pakistan-India border. All it now says is that if Pakistan were to disrupt supplies to India, Iran will make a proportionate cut in the quantities to be delivered to Islamabad.
I think it does not make sense for India to enter into it if Iran continues like this.
New Delhi, Feb 22: Iran has jacked-up by 20 per cent the price of natural gas that is to flow through the long- delayed Iran-Pakistan-India pipeline, making it the most expensive fuel in the country.
At the current crude oil price of USD 40 a barrel, Iranian gas will cost New Delhi USD 5.9 per million British thermal unit at Iran-Pakistan border, sources said.
Iran, which had originally priced its gas at USD 3.2, had in 2007 revised the rates to USD 4.93 per mBtu at USD 60 a barrel crude oil prices, which was accepted by India.
Sources said Iran has again changed the formulation that would mean India paying USD 7.1 per mBtu in the likely event of oil prices rising to USD 50 and USD 8.3 per mBtu if oil price was to touch USD 60 a barrel.
Added to this would be a minimum of USD 1.1-1.2 per mBtu towards transportation cost and transit fee that India would have to pay for wheeling the gas through Pakistan, they said.
Gas from the Panna/Mukta and Tapti fields in Mumbai offshore fetches the maximum USD 5.70 per mBtu, while Reliance Industries' Krishna Godavari basin gas has been priced at USD 4.20 per mBtu if crude oil price was USD 60 or more.
Sources said New Delhi was likely to reject the changes, which were conveyed by Iranian chief negotiator H Ghanimi Fard to Indian Ambassador to Iran last month, 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.
The latest move by Iran, which holds the world's second largest gas reserves, may have been triggered by the drastic fall in international crude oil prices which have dived from USD 147 a barrel in August 2008 to below USD 40 now.
As per the previously agreed formula of charging 6.3 per cent of the the 10-month average of Japanese Crude Cocktail (JCC) plus a fixed USD 1.15 per mBtu, the gas price at the current crude oil price would have come to USD 3.67 per mBtu.
So the formula has now been changed to 12 per cent of JCC plus USD 1.1 per mBtu fixed cost, sources said, adding, this would be the price of gas at Iran-Pakistan border.
Sources said Iran was not willing to commit to a supply- or-pay regime wherein it would have been held accountable for non-delivery of gas at 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.
Iran has also ignored New Delhi's demand for a trilateral Bureau Report mechanism for securing delivery of gas at Pakistan-India border. All it now says is that if Pakistan were to disrupt supplies to India, Iran will make a proportionate cut in the quantities to be delivered to Islamabad.
I think it does not make sense for India to enter into it if Iran continues like this.
