'China pipeline entry an empty threat'

Iran's proposal to transform the $7.4 billion Iran-Pakistan-India (IPI) gas pipeline project to an Iran-Pakistan-China (IPC) project is nothing more than an "empty threat", according to Indian officials, who say the move is fraught with technical and financial challenges.

Progress on the 10-year-old pipeline proposal has been slow due to political and commercial disagreements between the three partner countries. The US has also expressed its opposition to the project.

IRAN GAS PIPELINE "" WHAT INDIA WANTS

Lower transit fee payable to Pakistan

No gas price revision over the 25-year contract

No take-or-pay agreement for the gas

Independent third party to monitor the pipeline to ensure supply

Companies outside the three promoter nations to take stake in the project

However, in the recent past, Iran and Pakistan claim to have agreed on the main issues "" the price of gas and the price revision clause. India has an issue with the price revision clause (proposed by Iran) as well as the transit fee (payable to Pakistan).

Dismissing the proposal to replace India with China in the pipeline as "nothing more than pressure tactics", Indian officials say India is the best buyer of gas.

"Iran will get a better price in India than China, which is always a much difficult negotiator than India has been," says a senior petroleum ministry official.

India, Pakistan and Iran had mutually agreed to a price of $4.93 per million British thermal unit (mBtu) for the gas from the South Pars field in Iran. India would have to also pay a transit fee and transportation tariff to Pakistan, which would inflate the price at the India-Pakistan border to around $7 per mBtu. Indian officials say it would be much more difficult to get such a price from China.

There is also the technological challenge of taking the pipeline to China from Pakistan through the Himalayas. Iran officials say that such a pipeline to China is economically and technologically feasible.

Political problem
Indian officials say the primary reason why it has not been able to move forward on the pipeline deal, which would increase India's gas availability by a third, is due to the political instability in Pakistan.

Pakistan is scheduled to go to elections next week, after which India says it will open discussions with its neighbour to settle the transit fee issue for the gas passing through Pakistan.

India and Pakistan have already agreed on the principles of calculating the transportation tariff that India has to pay to Pakistan to the gas.

Third party involvement
India is also keen on an agreement where an independent party monitors the pipeline that passes through some of the world's most sensitive areas of Iran and west Pakistan.

"Ideally, we would not agree on a take-or-pay agreement as there is still no certainty of safety of the pipeline," the oil ministry official said. "The gas consumers in India have to be assured of continuous supply over the 25-year contract period as they will invest in their industries to receive the gas," he added.

Russian company Gazprom had earlier shown interest in not only laying the pipeline but taking a participating interest in it. "That suits us, as it involves a party which is not selling or buying the gas, and thus helps ensure success of the pipeline project," the official said.

Even though it is being pushed, India does not want to rush into the deal as it fears that failure of the project would not go down well its creditors for the project. "We are answerable to a lot of people and Iran and Pakistan have to understand that," the official said.

India also wants a stake in laying the 2,775-km-long pipeline, in order to ensure that it has a say in its functioning and not be just a buyer of the gas. Currently each country is to lay the pipeline in its own territory.