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Iran gas deal may be the costliest in the world

Iran is seeking $8-9 mBtu price for the natural gas it wants to sell to Pakistan and India through a $7 billion pipeline.

india Updated: May 03, 2006 14:17 IST

Iran is seeking $8-9 per million British thermal unit (mBtu) price for the natural gas it wants to sell to Pakistan and India through a $7 billion pipeline.

"Iran has quoted $8.2-9 per mBtu price for the gas. This is double the market price of natural gas in India," a top official said.

At this price, Pakistan, with a GDP of $90 billion, would end up paying about $8.3 billion annually for 70-80 million standard cubic meters per day gas it wants to import from Iran.

For India, the import of 90 mmscmd gas from Iran would cost around $9.2 billion annually.

"Such high price is not acceptable," the official said.

Tehran is also seeking higher price for 5 million tonnes liquefied natural gas (LNG) it plans to sell to India through a separate contract.

Against the maximum price of $3.25 per mBtu agreed upon as part of the 25-year LNG contract signed in June 2005, Iran is now seeking $5.1 per mBtu, he said.

"At this price, this would be the costliest long-term LNG deal in the world. We are currently importing 5 million tonnes LNG from Qatar at $2.53 per mBtu.

"This price would rise to $3.5 per mBtu in 2008. Qatar is selling LNG to USA between $4.5-4.8 per mBtu and other long term LNG contracts around the world cost no more than $4.75 per mBtu," the official said.

Price according to this formula was capped at $3.215 per mBtu at $31 a barrel Brent price.

Now Iran wants the cap to be raised to $60, the official said.

As per the original formula agreed with Iran, $0.30 per mBtu would have to be added for transporting the gas in its liquefied form in specialised tankers from Phase 12 of the gigantic South Pars gas field and the delivered price of LNG in India would be $3.50 per mBtu.

The fixed price component ($1.2 per mBtu) had an escalation of 2 per cent per year after the second year of the contract delivery.