India announced that it is considering paying a higher price of up to USD 4.50 per million British thermal units (BTU) for Iranian Liquefied Natural Gas (LNG) and close a long-term supply deal to fuel its fast growing economy.
Indian oil companies had signed a 25-year old deal with National Iranian Gas Export Company (NIGEC) in June 2005 to buy five million tons of LNG at a price linked to a USD 31 a barrel of crude oil which would translate to USD 2.9 per million BTU. Cognizant of rising oil prices, Tehran reneged on this deal and wants a higher price from India and even wanted an open ended contract. Timed with India's voted against Iran's nuclear program at the International Atomic Energy Agency (IAEA), the refusal to ratify the deal led many to speculate that the deal is being linked to India's vote.
Initially India balked at this idea demanding that Iran stick to its obligations. However, with LNG sources in short supply and the demand for LNG high, India seems to be complying with Tehran's demands which would still need a Cabinet approval. India imports 70% of its fuel consumption.