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State-run gas utility GAIL India Ltd has begun talks with Iran to revive a decade-old $22 billion LNG supply contract, the cheapest deal ever struck by an Indian firm.
Indian state firms had on June 13, 2005 signed a Sale and Purchase Agreement (SPA) with National Iranian Gas Export Company (NIGEC) for buying 5 million tons a year of LNG on a long-term contract at very attractive price of $3.215 per million British thermal unit. But Tehran never honoured the deal.
With prospects of sanctions against Iran being lifted after a historic nuclear accord it stuck with the US and other world powers, India has reopened dialogue on buying LNG from the Persian Gulf nation.
"Dialogue has been initiated with Iranian counterparts to revive the LNG supply long-term SPA," GAIL said in its latest annual report.
In the June 13, 2005 contract, GAIL has signed to buy 2 million tons per annum of LNG from NIGEC while refiner Indian Oil Corp (IOC) had signed for 1.75 million tons. Bharat Petroleum Corp Ltd (BPCL) was to take another 1.25 million tons.
"Iran has so far not responded to the offer," a GAIL official said. "There is a half-finished LNG export terminal in Iran which will have to be completed before any export of LNG can begin from Iran."
The 2005 deal, he said, was an extremely attractive deal with price linked to Brent crude oil price with a floor of $10 per barrel and a ceiling of $31 a barrel.
The official said Iran had in the June 2005 deal attached a side letter that required NIGEC to obtain approval of National Iranian Oil Company (NIOC) for the LNG SPA within 15 days. However, NIGEC neither secured this approval nor implemented the LNG SPA.
The official said the SPA, as per international law, was enforceable without the SPA.
India, he said, had taken an opinion from international law firm Gide Loyrette Nouel of France, which had earlier vetted the LNG SPA as per English law, on the issue. The law firm stated that the Side Letter to the SPA (in which the approval of NIOC Board being mandatory for the deal was mentioned) does not amend the Agreement and NIOC's approval would not constitute a 'Condition Precedent'.
Accordingly, the LNG SPA remained enforceable.
