The Hindu Business Line : LNG from Iran: Deal depends on access to liquefaction tech

Official sources speaking to Business Line concede that there are concerns about Iran's ability, at this point of time, to convert natural gas into liquid form so that its transportation becomes easier. But these sources are equally confident that these technical hurdles are something, which can be overcome. Currently, the technology for liquefaction of gas is vested in the hands of a clutch of US companies and European companies.

In fact, neither the Indian companies nor their Iranian counterparts have this technology at present.

Threat of sanctions from the US deter these European and American companies from offering this technology to Iran. However, there have been attempts by the stakeholders in this project to procure this liquefaction technology. Engineers India Ltd and Indian Oil Corporation Ltd can be asked to negotiate the terms for adopting the liquefaction process, sources said.

Giving an example of China, sources said, Iran is the second largest supplier of crude oil to China. It has also signed a $70-billion LNG deal with China in September 2004. This, these sources feel, is an indication that the technological hurdle might not prove to be a stumbling block as it seems at this moment.

Besides, the technological issue, the other question being raised was the interface at the local level in Iran.

Hence, to complete a project in Iran will be a challenge, sources said. Meanwhile, a technical team from Iran was in the Capital during the weekend to discuss the nitty-gritty of the project. India and Iran have recently entered into $20-billion LNG deal. As per the deal, National Iranian Gas Export Company (NIGEC) would export LNG to India for 25 years from the end of June 2009. The exports would start at 4 million tonne and then build up to 5 million tonne over the first year of contract.

The Indian partners in the deal would be Indian Oil Corporation and GAIL (India) Ltd. Given that gas price is linked to global crude price, at the current level the power at the western coast would cost Rs 2.30 - Rs 2.40 per unit in 2009 once the project is implemented.

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