Iran has raised the price of natural gas that is to flow through the long-delayed Iran-Pakistan-India (IPI) pipeline by 20 per cent.
At the current crude oil price of $40 a barrel, Iranian gas would cost New Delhi $5.9 per million British thermal unit at the Iran-Pakistan border, sources said. Iran, which had originally priced its gas at $3.2, revised the rates to $4.93 per mBtu at $60 a barrel crude oil prices in 2007, which was accepted by India.
Sources said Iran had again changed the formulation that would mean India paying $7.1 per mBtu in the likely event of oil prices rising to $50 and $8.3 per mBtu if the oil price was to touch $60 a barrel. Added to this would be a minimum of $1.1-1.2 per mBtu towards the 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 $5.70 per mBtu, while Reliance Industries’ Krishna-Godavari basin gas has been priced at $4.20 per mBtu if the crude oil price was $60 or more. Sources said New Delhi was likely to reject the changes, which were conveyed by Iranian chief negotiator H Ghanimi Fard to the Indian Ambassador in 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 the 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 $147 a barrel in August 2008 to below $40 now.
According to the previously-agreed formula of charging 6.3 per cent of the 10-month average of Japanese Crude Cocktail (JCC) plus a fixed $1.15 per mBtu, the gas price at the current crude oil price would have come to $3.67 per mBtu.
So the formula has now been changed to 12 per cent of JCC plus $1.1 per mBtu fixed cost, sources said, adding, this would be the price of gas at the 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 the 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 mechanism for securing delivery of gas at the Pakistan-India border. All it now says is that if Pakistan were to disrupt supplies to India, Iran would make a proportionate cut in the quantities to be delivered to Islamabad.
