Iran close to India-Pakistan gas deal

A controversial $7bn gas pipeline extending from Iran to Pakistan and India was on track for completion by 2011, said officials as the latest round of talks concluded yesterday in New Delhi.

India’s petroleum ministry confirmed that details of the pipeline agreement, including delivery points at borders, security and a framework agreement for the project, were being finalised by the third day of talks.

Each country will fund the portion of the pipeline running through its territory, according to financing terms of the project proposed more than a decade ago.

MS Srinivasan, Indian petroleum secretary, said India and Pakistan had reached “an understanding” on transport charges, but transit fees would continue to be discussed. Pakistan has invited the Indian petroleum minister to Islamabad for talks next month, which would be followed by trilateral talks with Iran.

Hojatollah Ghanimi-Fard, executive director for international affairs of the National Iranian Oil Company and Iran’s negotiator for the project, earlier in the week expressed hope that the deal would be signed by the three countries’ ministers in July.

He said the price paid by India and Pakistan for the gas would be based on a “formula” suggested by a foreign consultant, without mentioning the name. This was based on the liquefied natural gas price in Japan “to get away from too much volatility of the market”.

Iran holds the world’s second largest gas reserves, but the prospect of tightening economic sanctions amid international pressure over the Islamic republic’s nuclear programme has discouraged many from investing with Iran.

However, both India and Pakistan have vowed to go ahead. India, which imports about 70 per cent of its oil and gas, is compelled to seek out sources of energy in order to fuel booming economic growth.

Jonathan Stern, a gas expert at the Oxford Institute for Energy Studies, said even if tensions over Iran’s nuclear programme eased, Iran’s record as a supplier did not inspire confidence.

Making progress on projects in Iran has proved difficult, and Iran’s supplies to Turkey, for example, have been intermittent. “The Iranians have never really been able to do these deals,” he said. “They have talked about all sorts of projects but never really been able to follow through.”

Prof Stern suggested India, which should have four terminals to import LNG open by 2011, might do better to wait and assess conditions in a few years.

Mr Ghanimi-Fard did not rule out the problems sanctions could cause but said: “Sometimes you curve the barrier, sometimes you break through it.”

The project is set to provide India and Pakistan with 60m cu m of gas a day (22bn cu m a year) in the first phase and 150m cu m a day in the second phase over 25 years through a 2,600km pipeline. It is not clear when the second phase will begin.

Pakistan and India will have equal shares of the gas in the first round, but India will receive more gas in the second phase.

Additional reporting by Ed Crooks in London

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