Iran gas pipeline: Consultant to decide on pricing

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With no solution to the impasse on the gas pricing issue for the $7-billion Iran-Pakistan-India pipeline project, the three nations today decided to appoint an international consultant for the purpose.

A decision to this effect was taken after two-day Secretarial-level trilateral talks failed to create a breakthrough on the issue. The three countries had set up a nine-member committee at the end of day one of their talks on Thursday.

After discussing the report of the committee and with the issue of pricing still remaining unresolved, it was decided to appoint an international consultant who would present a formula for gas pricing within a month, Mr M.S. Srinivasan, Petroleum Secretary, told newspersons.

The buyers - India and Pakistan - have suggested names of a few consultants, including a French and a British firm, to Iran, which would then appoint the consultant in a week.

After receiving the report of the consultant, Iran would host the next round of trilateral talks. The possible consultants include Porten and Partner.

The Iranian Deputy Oil Minister for International Affairs, Mr M.H. Nejad-Hosseinian, said: "We have decided to appoint a consultant who will help us to get closer to a price formula. The consultant's report will, however, not be binding."

An agreement on the price is crucial for the 2,100-km pipeline project to move forward.

While Iran is maintaining that the price quoted by it, which is pegged to crude oil prices, is fair and just, India and Pakistan are seeking a much lower price. The Iranian formula would work out to more than $8 per million British thermal unit (mBtu); India had earlier offered $4.25 for gas delivered at its border with Pakistan.

Indications are that though India has put forward another proposal, raising the price a little higher to $4.42, no favourable response was forthcoming from Iran.

Iran wants to sell gas at 10 per cent price of Brent crude plus a fixed component of $1.2 per mBtu at the Pakistan-Iran border. Assuming an average Brent of 70 per cent, the cost of gas at Pakistan-Iran border works out to $8.2, far higher than the $4.25 offered by India at the Pakistan border. India's gas price offer of $4.25 is inclusive of the transit fee to be paid to Pakistan.

Meanwhile, Iran has already begun construction of pipeline within its territory.

On the price issue, Pakistan's stance is no different from that of India, with its officials saying that it is key to the economic viability of the project whether they decide to import gas from Iran on a bilateral or trilateral basis.

Taken from Business Line

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