India & Iran Still Negotiating LNG Price.

India and Iran said last week they were still negotiating the price of LNG to be supplied by Tehran but expressed confidence that a deal would be reached soon and that a pipeline linking Iran and South Asia would be built. APS understands that the gap between the two sides is still wide, with the state-owned National Iranian Gas Export Co. (NIGEC) insisting on a minimum price of $7/m BTU and the Indian side offering a mere $4/m BTU.

An APS source in Tehran disclosed last week that NIGEC and Sinopec had agreed on a price of $7/m BTU for 250 million tons of LNG to be lifted by the Chinese company from 2009 for a 25-year period. This was reached as part of a $100 billion deal covering oil and gas as well as development of the Yadavaran oilfield (see in omt22IranDamageNov27-06).

Last year the NIGEC said it would export up to 5 million tons per annum of LNG to India for 25 years from the end of 2009, but the deal was subject to ratification by the Iranian government. The two states have since been in dispute over the price India will pay for the LNG a year, and the haggling had become a stumbling block in attempts to build a pipeline to bring Iranian natural gas to Pakistan and India. "India and Iran are renegotiating the LNG pricing", Oil Minister Murli Deora told reporters after a recent meeting with the visiting Iranian Foreign Minister Manouchehr Mottaki. Mottaki said Iran was keen to press ahead with both the LNG deal and the gas pipeline, adding: "I am sure with further negotiations with a specific formula we will finalise the LNG imports from Iran to India. Based on political will India will receive gas very soon".

New Delhi accuses Tehran of seeking to increase the price tag, while Iran says the Indian offer is too low. Iran has the second-largest natural gas reserves in the world behind Russia - about 940 TCF - while growing Asian economies, including India and Pakistan, are scrambling for energy sources.