India, Pakistan and Iran to hire consultant to resolve pipeline dispute

Aug 04, 2007 02:00 AM

India, Pakistan and Iran have agreed to appoint an independent consultant to resolve a pricing dispute over a natural gas pipeline to span the three countries, officials said.
India and Pakistan want to pay less than the price proposed by Iran for the gas, which would be channelled to the subcontinent from Iran via a 2,600-km (1,615-mile mile) pipeline.
If built, the pipeline is expected to be able to handle 150 mm cm (5.2 bn cf) of gas a day and will cost around $ 8 bn (EUR 6.25 bn) to build, according to current estimates.
"The consultant will submit (a) report within one month," India's Petroleum secretary M.S. Srinivasan was quoted as saying at the end of trilateral talks on the proposed pipeline.

The decision to appoint a consultant was taken after the three countries could not agree on pricing. India and Pakistan, jointly negotiating the gas price with Iran, had earlier rejected a pricing formula offered by Iran. That formula includes 10 % of the Brent crude price plus $ 1.20 (EUR 0.094) per mm Btu, a senior Indian executive close to the talks was quoted as saying. The executive cannot be named due to the sensitivity of the negotiations.
Going by the Iranian formula, the delivered price of Iranian gas would work out at $ 8.20 (EUR 6.4) per mm Btu, assuming a 15-day average Brent crude price of $ 70 (EUR 54.7) a barrel, the executive said. New Delhi is seeking delivery of Iranian gas at the India-Pakistan border of $ 4.25 (EUR 3.32) per mm Btu.

A senior Pakistan government official said Islamabad was also pursuing the pipeline with Tehran on a bilateral basis. Iran's Deputy Oil Minister M.H. Nejad Hosseinian, leading the Iranian delegation, said Iran had already begun construction on the section of the pipeline inside its territory.
The project was first proposed by Iran about a decade ago. Iran wants to develop outlets for its large proven natural gas reserves, estimated at 23 tcm (812 tcf). If the project goes ahead, India could initially buy up to 60 mm cm, or mm cm of gas a day from Iran, while Pakistan could buy as much as 30 mm cm.

If everything goes well, the pipeline could become a reality by 2011, Indian officials say.
According to the latest government estimates, India's gas demand is expected to rise to a massive 400 mm cmpd by 2025 from the current 150 mm cm.

Source: The Associated Press
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