Iran Is Counting On India For 9M T/Y Of LNG Exports.

PetroPars, a semi-autonomous affiliate of the state-owned National Iranian Oil Co. (NIOC), on Nov. 23 mapped out terms of a deal to sell 4.5 million tons/year of LNG to India and get Indian assistance in marketing another 4.5 million t/y. The state-run refiner, Indian Oil Corp. (IOC), will be the company involved as a partner for PetroPars. The LNG plant, to be built near a gas processing facility at Asaluyeh, will consist of two trains which should be on stream in late 2008 or early 2009.

PetroPars, owned by the state's financial firm NICO said to be controlled by former president Ali Akbar Hashemi Rafsanjani, and IOC will jointly develop one block of the offshore South Pars gas field for the LNG venture. Reuters on Nov. 24 quoted Gholamreza Manouchehri, managing director of PetroPars, as saying his company will hold 60% in this upstream element of the venture, while IOC will have 60% of the downstream element.

IOC will have a 40% stake in the buy-back deal for the upstream element, and PetroPars' stake in the LNG venture will be 40%. APS understands that, in view of IOC's lack of experience in gas liquefaction or the LNG business, the Indian company would sell an important part of its 60% downstream equity to a qualified international company.

Manouchehri told Reuters PetroPars had signed a memorandum of understanding with IOC that would create a consortium to set up a plant to produce 9 million t/y of LNG. "Out of this, 4.5 million tonnes will be purchased by the Indians and they have expressed an interest in marketing the other 4.5 million tonnes", he told Reuters.

News of the LNG/South Pars deal came as a delegation of Indian oil and gas executives arrived in Tehran to take up negotiations left off in New Delhi recently with a team from PetroPars. PetroPars, which has developed Phase 1 of South Pars and is developing Phases 6-8, has said the part of the offshore field to be involved in the partnership with IOC will be one of the 12 phases. What was confusing was Reuters' mention of 150,000 b/d of crude oil also to be involved in the deal.

Iranian Deputy Oil Minister for International Affairs, Dr. Hadi Nejad-Hosseinian, on Nov. 23 said negotations with the Indian side hinged on the price of the LNG. He told the Iranian Students News Agency (ISNA) that if a deal were finalised it would be worth between $35-$40 billion.

On Nov. 23, the Indian publication The Business Standard said the LNG price being negotiated was $2.57 per million BTU. However, it said the buyer and upstream partner to be involved on the Indian side will be ONGC Videsh Ltd., the overseas unit of exploration and production company Oil & Natural Gas Corp.

Reuters quoted Manouchehri as saying India would be entitled to develop "something under 150,000 barrels of Iranian crude per day" from an onshore field, and that the LNG purchase agreement was "pencilled in to last 25 years".

Reuters also mentioned Iranian Oil Minister Bijan Zanganeh as offering no new clues on which onshore oilfield the Indians could be given in return for their investment. "The role of Indian companies in one of our country's oilfields is not yet settled", he told the ministry Website. In the past, Zanganeh narrowed the choice of fields to be offered down to Yadavaran, Jofeyr and North Azadegan.

India imports 70% of its crude oil requirements and demand is rising rapidly. It is competing with China for stakes in foreign oilfields that will meet its energy needs.

China last month signed a $70 billion oilfield development and LNG agreement with Iran. Although Iran holds the world's second biggest reserves of natural gas it has been slow to develop its resources which officials see hitting the market in late 2008 or early 2009.

The Business Standard of India Nov. 23 reported that the Indian government was during the week likely to sign a contract with Iran for the purchase of 5 million tons/year of LNG in return for Tehran offering New Delhi a 20% stake in the Yadavaran oilfield, which could produce 300,000 b/d.

The report said Petroleum Secretary S.C. Tripathy and executives of two state-run oil and gas companies were to be in Tehran to oversee the deal, "under which Iran has offered to sell the gas at $2.57 per million BTU". The report said Iran had agreed to give the oil stake to ONGC Videsh Ltd.

Last month, IOC Chairman M.S. Ramachandran told reporters that the Iranian Oil Minister Bijan Zanganeh had agreed to give IOC one of the 12 South Pars field blocks. Ramachandran said: "The gas production from the block would be the property of NIOC. We will have to negotiate a price with NIOC to buy that gas for export to India [in LNG form]".

India has around 80 MCM/day of gas available for sale, which meets only around 70% of the country's demand. The vast country will depend on natural gas imports despite local discoveries, as demand is to reach 325 MCM/day by 2019-20. In view of that surge in demand, Indian firms are looking at the prospect of buying stakes in oil and gas fields overseas to supplement a flagging domestic petroleum output.