India strikes 25-year deal to buy Iranian gas

India has reached an agreement with Iran to buy 7.5 mm tons of LNG a year over 25 years, the government announced. Oil Minister Mani Shankar Aiyar sealed India's first big gas deal with his Iranian counterpart Bijan Namdar Zanganeh on the sidelines of an Asian ministers' oil meeting in New Delhi.
"India's state-run Gas Authority of India Limited and Indian Oil Corp have signed an agreement with National Iranian Gas Export Corp to import 7.5 mm tons of LNG for 25 years," Aiyar said.

Zanganeh confirmed the agreement but neither minister gave details of the pricing formula. Negotiations had begun in January 2003 as India sought to meet a huge need for gas in the country of more than 1 bn people. India had been pushing for a fixed-term/fixed-price contract similar to a deal it has with Qatar, but Iran had signalled unwillingness to agree such terms.
"We have come to a good deal. In the present circumstances, it is a good deal," said Gas Authority of India Limited chairman Prashanto Banerjee.India and Iran had failed to reach an agreement in December when Aiyar went to Tehran to attend an oil and gas industry conference.

The government statement also said India's state-run Oil and Natural gas Corp's overseas arm has entered into an agreement with the National Iranian Oil Company to take a 20 % stake in Iran's Yadavaran field and an unspecified stake in the Jufeyr field.
"It was agreed to further the mutual cooperation between the two countries in the hydrocarbon sector in a big way," said an Indian government statement. Aiyar said the Iranian oil minister had invited more Indian investments in his country.
"The Iranian side further offered to the Indian companies the opportunities for investments for producing fertilizers, ethylene, methanol, ammonia and other things in Iran," he added. The Iranian side also suggested that Indian firms could set up energy-intensive projects such as aluminium, cement and steel firms, he said. State-run Indian Oil Corporation, the country's largest oil refining and marketing company, would explore investment opportunities in Iran, he added.

Islamabad's proposal to a visiting Iranian delegation that the Iran-Pakistan gas pipeline can be pursued as a bilateral project if India is not willing to join it at this stage speaks of a pragmatic approach. If the step is taken, this multi-billion dollar project can finally be extended to India if and when that country in ready to join it. Till now, tensions and misgivings between India and Pakistan have dimmed the wider prospects of the project despite the great economic benefits it promises to both.
One hopes that the commencement of the project will prompt both India and Pakistan to take a fresh look at their mutual relationship so that they are able to settle issues that have come in the way of an Iran-Pakistan-India pipeline project. Much of India's concern on the score relates to the security of the pipeline and the guarantee that gas supply will not be disrupted even if India-Pakistan relations sour in the future.

The project promises great potential for the three countries involved. Studies suggest that Pakistan's gas shortfall will start from 400 mm cfpd in 2010 and will rise to 4 bn cfpd by 2025, as the economy grows at the rate of over 7 % annually. For India, this will mean a cheaper alternative to its expensive fuel imports to run industries in Punjab, Rajasthan and Gujarat states.
With limitless possibilities, the idea of cooperating in supply and availability of energy resources should be taken up on a priority basis. Discussions on fostering regional connectivity in the field of energy and the establishment of a ministerial forum on energy have been held in addition to proposals for setting up a Saarc energy centre.

With the economic agenda of Saarc countries gaining importance, the idea of setting up an energy grid in the region is very encouraging. In this regard, the Iran-Pakistan-India gas pipeline project would be an out-standing example of regional cooperation.
Islamabad has given assurances that it is ready to guarantee the safety of the pipeline which will transfer Iranian gas to India through Pakistan. Pakistan's Prime Minister Shaukat Aziz has told visiting Iranian oil ministers days ago that his country will guard the safety of pipeline with all possible means.