Sunday, June 12 2005 19:15 Hrs (IST) - World Time -

Tehran: India is likely to sign tomorrow (Jun 13, 2005) a $25-billion deal with Iran for import of Liquefied Natural Gas (LNG) beginning 2009-10 for meeting its growing energy requirements.

The Gas Sales and Purchase Agreement (GSPA) for at least 5 million tones per annum of LNG beginning second half of 2009-10 will be signed by a consortium of Indian firms and National Iranian Gas Export Company (NIGEC), officials said.

Of the 5 million tonnes per annum LNG to be imported from Iran, State-run gas utility GAIL (India) Ltd will be responsible for marketing 40 per cent, Indian Oil Corp (IOC) 35 per cent and Bharat Petroleum Corp Ltd (BPCL) the remaining 25 per cent.

"We have been insisting on the LNG quantity be raised to 7.5 million tones we have to wait for the outcome of my talks with Iranian Oil Minister Bijan Zanganeh," Petroleum Minister Mani Shankar Aiyar said.

Iran has refused to give concession on price for an additional 2.5 million tones of LNG New Delhi wants to buy over and above the 5 million tones per annum of LNG already agreed. On the contrary, Iranian side has proposed a hike in price.

However, Iran has agreed to maintain C2 (ethane) component in the LNG at 5 per cent.

Aiyar said a GSPA for at least 5 million tones per annum of LNG would be signed on June 13 and if Iran agrees the quantities can be raised to 7.5 million tones or else discussions would continue for additional supplies.

As per the pricing formula agreed, India will pay Iran 0.065 of Brent crude oil price at the time of loading of each consignment plus a fixed price of $1.2 per million British thermal unit (mBtu).

Price according to this formula would be capped at $3.10 per mBtu at $31 a barrel Brent price, officials said.

To this $0.30 per mBtu would be added for transporting the gas in its liquefied form in specialized tankers from Phase 12 of the gigantic South Pars gas field and the delivered price of LNG in India would be $3.40 per mBtu. The fixed price component ($1.2 per mBtu) would have an escalation of 2 per cent per year after the second year of the contract delivery.

Officials said that Iranian gas was costlier than the LNG India was importing from Qatar. Qatar LNG has been priced in a band of $16 to 24 a barrel of Japanese Crude Cocktail (JCC). Qatar is selling LNG for the first five years at a fixed price of $2.53 per mBtu at $20 a barrel oil price.

Since the current fixed price ends in 2009, Qatar LNG price will rise by 52 cents to $3.05 per mBtu at the ceiling of the price band. Added to these prices is $0.26 per mBtu shipping cost, making the delivered price currently at $2.79 per mBtu and at $3.29 per mBtu after 2009.

Indian companies will also have a right to take stake in the plant that will be set up in Iran to liquefy the natural gas produced from Phase-12 of South Pars gas field.

Indian firms can take upto 4 per cent stake for every one million tone of LNG they buy.

Aiyar said India had linked purchase of LNG from Iran to ONGC Videsh Ltd, the overseas arm of State-owned Oil and Natural Gas Corp (ONGC) getting a 20 per cent share in the development of Iran's biggest onshore oilfield, Yadavaran and 100 per cent in 30,000 barrels per day Jufeyr field.

The 20 per cent in Yadavaran would translate into 60,000 barrels per day of crude oil for India, he said.

"While talks on LNG purchase have progressed well, the deal for equity in oil fields has not moved. I hope at the conclusion of three-day ministerial level discussion (with Iran) something concrete emerges," he said.