20-07-04 Hopes have once again been revived on the Iran-India natural gas pipeline project following minister for external affairs, K. Natwar Singh’s declaration, that the UPA government was not averse to it.
As a result, when the commerce secretaries of India and Pakistan meet to discuss steps to normalize trade ties under the auspices of the composite dialogue process, Islamabad will be stepping up efforts to persuade New Delhi to agree not only to the Iran-India project but also consider the Turkmenistan-India project. Both routes envisage transiting Pakistani territory. Islamabad has even offered to provide international security guarantees to allay India’s security concerns with regard to the project.

The Iran-India project was first mooted in January 2003, when Iran and India had signed a MoU to establish joint ventures to invest in oil and gas projects in both countries. At the time, three possible pipeline routes had been proposed:
-- Overland, crossing Pakistan and entering western Rajasthan covering a distance of roughly 2,600 km.
-- Shallow offshore, outside Pakistani territorial waters. However, this route was more or less rejected as under the law of the sea, a confirmation for building such a pipeline is required from Islamabad as it passed through its external economic zone and permission is mandatory to conduct surveys in its waters. Moreover, the coast offshore Iran and Pakistan exhibits seismic activity because of plate movement, which in turn raises technological hurdles.
-- Deep offshore, thereby avoiding Pakistani exclusive economic zone. However, this entails much higher capital cost as well as technical problems such as movement and sinking of the sea bed.

Although relevant government agencies are involved in the talks, some private energy companies were also interested in keeping the project alive. Chief among these were Reliance and the Australia-based firm, BHP Billion. However, while Reliance is also believed to be interested in the LNG option, BHP’s involvement is mainly in the pipeline project. In 2002, it was in negotiations with NTPC, which is seeking long-term and cost-effective fuel supplies for some of its upcoming power projects in north India, expected to come on line in 2007.
In April 2002, BHP submitted an EoI based on supply via the Iran-India onshore gas pipeline. According to BHP sources, NTPC is believed to have conveyed to BHP that it would look favourably at the Iran-India pipeline, the price being the driving appeal. However, this was contingent on the timing of the pipeline project as well as the Indian government’s blessings.

Given India’s concerns regarding the security of supplies, both the Iranian company in charge of the project -- National Iranian Oil Company -- and BHP had suggested some of the following measures to ensure the project’s security: Sovereign as well as inter-governmental guarantees, appointment of independent operators, creation of an escrow account for transit fees, satellite monitoring and fuel back-ups, amongst others.
If India overcomes its objections to the overland project, BHP says that it would take just a week to allocate gas for the project. The first phase of the project would see some 320 cfpd of gas being carried by the pipeline, which would be increased to 500 cfpd during the second phase.