India Intelligence Report

   Iran Rejects Indian Price Offer for Gas



  • Iran ridicules Indian price offer on gas as “subsidized domestic prices”

  • Iran wants link to Brent crude oil prices without floor and ceiling levels which India opposes

  • 3rd tripartite meeting is scheduled August 3-4

Iran rejected India’s demand for international long-term contracts gas price parity insisting that it will sell for at least USD 7.2 per British thermal unit (mbtu) price while the international long-term gas price is USD 4.2 mbtu for the Iran-Pakistan-India pipeline. This rejection dashed hopes that India had of fast-tracking the project.

Iranian Oil Minister Kazem Vaziri-Hamaneh ridiculed the Indian offer as “subsidized domestic prices” and aggressively noted that they “have no obligation to sell it at the price lower” that what they think is the “real one.” Iran’s gas pricing formula is linked to Brent crude oil with a fixed escalating cost component that equals 10% of Brent crude oil and a 3% annual escalation which Tehran says is USD7.2 per mbtu but without a floor and ceiling price. Indian sources say that this quote is 50% of the prevailing market determined gas price in India which makes it too expensive and New Delhi is opposed to both the Brent crude oil price linkage and the absence of floor and ceiling price.

India wants to import 90 million standard cubic meters of gas per day (mscmd) from Iran through the 2100-km long pipeline while Pakistan has indicated a requirement of up to 60 mscmd. As an energy-deficit nation and despite doubts of security, Pakistan’s credibility as a transiting nation, and insurgency threats, India is planning to invest USD 7 billion for the project which is seen to benefit all three nations.

The third tripartite talks will be held August 3-4.

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