India willing to pay 50 pc more for Iran LNG

India is willing to pay 50 per cent higher price than the one agreed in June last year, to buy 5 million tonnes of Liquefied Natural Gas (LNG) from Iran.
GAIL (India) Ltd, Indian Oil Corporation and Bharat Petroleum, which had in June 2005 signed a deal with National Iranian Gas Export Company to buy 5 million tonnes of LNG at $3.125 per mBtu cap price, are now willing to pay $4.775 per mBtu.

?Iranians have been insisting that the June deal is off unless the price is revised. Though we have a water-tight legal case against them for not honouring a signed deal, we do not want to rock the boat now,? a top official said. As per the formula agreed last year, Iran was to charge India 6.5 per cent of the brent crude oil price at the time of loading of each consignment plus a fixed price of 1.2 dollars per mBtu. Price, according to this formula, was to be capped at $3.215 per mBtu at $31 a barrel brent price. For the initial two years, a 10 per cent discount was allowed leading to a price of $2.9 per mBtu from 2009 to 2011.

?We are willing to raise the $31 cap to $55,? the official said adding Tehran had sought a higher ceiling of $65 per barrel. At $65, the free-on-board price would come to $5.425 per million Btu. To this $0.30 per million Btu would be added for transporting the gas in its liquefied form in specialised tankers from Phase 12 of the gigantic South Pars as field.

Of the 5 million tonnes per annum, LNG to be imported from Iran, GAIL will be responsible for marketing 40 per cent, IOC 35 per cent and BPCL the remaining 25 per cent, the official said. The official said the fixed price component ($1.2 per mBtu) would have an escalation of 2 per cent every year after the second year of the contract delivery.

New Delhi wants Iran to maintain C2 (ethane) content in the LNG at 5 per cent and sign a ?supply-or-pay? contract, while India would sign a ?take-or-pay? contract. ?The deliveries look unlikely to start before 2011 as Iran has made little progress in the last one year on developing the gas field and award of contracts for build ing a plant to liquefy gas,? he said.

Source: Hindustan Times, New Delhi
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