Amid sanctions imposed by the United States, Iran has given a concession allowing payment for gas under the Iran-Pakistan (IP) gas pipeline project in currencies other than the US dollar.
According to a report compiled by the petroleum ministry in response to a report prepared by the Sustainable Development Policy Institute (SDPI), India was still part of the IP gas pipeline officially as the modalities between Iran and India for the supply of gas, including gas price, were still under discussion. The petroleum ministry said that the SDPI report was based on false assumption and misleading.
“Whether India has any objection to the gas price being negotiated between India and Iran, officially we do not know, but the Indian consumer is happy to pay $14 per million British thermal units (mmbtu) of LNG, excluding re-gasification, transportation and margins (based on prices) for the month of October 2013,” the petroleum ministry said in the report, adding that this price is about 81% of the oil parity in energy content basis, at an oil price of $100 per barrel.
The petroleum ministry said that the contract price of crude oil imported by India was in US dollars, however due to the hassles in payment transmission due to Iran’s geopolitical situation, India and Iran agreed to convert the US dollar value of payments to the equivalent in Indian rupee.
“The IP Gas Sales Purchase Agreement (GSPA) signed on June 5, 2009 also includes payments in currencies other than US dollars giving Pakistan the flexibility to make payments in a currency appropriate to the situation,” the petroleum ministry report added.
It said that an economic analysis of Iranian gas demonstrated that if the furnace oil-based power generation is replaced with imported gas, it will result in annual savings of $2.4 billion. It also said that the incremental impact of the price of IP gas will be just 20% in the overall country’s average gas basket price if 750 million cubic feet of gas per day (mmcfd) is imported.
“With the projected cost of the project at $1.8 billion, the savings render the project’s payback period less than a year,” the ministry said, adding that the SDPI report asserting an additional cost of $4.2 billion was misleading.
The petroleum ministry said that though price discussion between India and Iran is confidential, based on the updated market information the price at which Turkmenistan was selling gas to Iran at the border was conservatively about $11 per mmbtu.
Published in The Express Tribune, November 7th, 2013.