Deora stops in Iran to improve energy ties

Petroleum Minister Murli Deora, who is on a three-nation tour of West Asia and North Africa, made an unscheduled stop in Iran, a country in the eye of an international storm over its nuclear policy.

During Deora's one-day stopover at Tehran, issues related to the liquefied natural gas (LNG) import contract signed between the two countries was the focus of discussions.

"Certain other issues relating to the proposed pipeline from Iran to India through Pakistan were also discussed," a petroleum ministry official said. Iran, the world's fourth largest producer of crude oil, has 16 per cent of the world's gas reserves and 10 per cent of the world's oil reserves.

In June 2005, India had signed a sale-purchase agreement with Tehran for the import of 5 million tonnes per annum (mtpa) of LNG by the end of 2009. The contract, signed between the National Iranian Gas Export Company and a consortium of GAIL, Indian Oil and Bharat Petroleum, has not yet been approved by Iran's Supreme Economic Council.

Under the 2005 contract, India was to buy the LNG at $3.25 per million British thermal units (mBtu). Iran is now demanding more for the LNG after a sharp rise in global oil prices. The price of LNG is typically linked to crude oil prices, which rose to $75 a barrel in 2006.

Deora had said earlier this year that India was willing to pay a higher price for extra LNG from Iran if it honoured the existing contract, which is for import of 5 mtpa. The contract allows India the option of buying an additional 2.5 mtpa over the contracted 5 mtpa.

"Our stand has always been that Iran must honour the contract that has already been signed. We are willing to reconsider pricing for the additional LNG," the oil ministry official said.

The two countries are also planning a $7-billion gas pipeline to transport gas from Iran to India through Pakistan (called the IPI pipeline). The pipeline is currently being held up as India and Pakistan have not yet agreed on the transportation tariff that India will have to pay its neighbour for the gas that travels through Pakistan. "There are two or three sticky issues. The pipeline, too, was discussed with Iran," the official said.

India's largest refiner of crude oil, Indian Oil Corporation, had also signed an agreement with Tehran-based National Petrochemical Company.

The Indian company had been offered a stake in a petrochemical plant at Bandar Imam and in another upcoming complex at Bandar Assaluyeh in Iran's north coast. "Those deals have not taken off either. So the stopover at Tehran was aimed at ironing out these issues," the official said.

Deora was leading a delegation to Syria, Algeria and Egypt, which comprised the chairmen of Oil and Natural Gas Corporation, Indian Oil Corporation, GAIL and Engineers India Ltd.