The Hindu Business Line : Pak rules out LNG spot price as yardstick for Iran gas project

PAKISTAN has indicated that it is not willing to accept Iran's proposal for linking gas price with the spot market price for liquefied natural gas (LNG) for the Iran-Pakistan-India gas pipeline.

Mr Mukhtar Ahmed, advisor to the Pakistan Prime Minister, said the spot price for LNG was not a realistic yardstick for determining the gas price for a project that is going to extend to almost 30 years, involving huge investments. There has to be a degree of comfort for the investors, he said on the sidelines of the Fourth Asia Gas Partnership Summit.

Currently, LNG prices in the global spot market are at levels of $10-12 million per British thermal unit.

LNG policy soon: Mr Ahmed added that Pakistan hoped to finalise an LNG policy within the next few weeks. Meanwhile, the Petroleum Secretary, Mr M.S. Srinivasan, has also said that price negotiations would be of crucial importance in the discussions on the Iran gas project.

According to the Secretary, the project would involve around $50-billion investment inclusive of the cost of pipeline construction, exploration and production of gas in Iran and supply through the pipeline and the added cost for storage of gas as provision for any possible disruption in supplies. It would also involve investment required in setting up power plants and other infrastructure for absorption of the gas supplied.

"Arrive at the right price early and the project is on. Without clearly understanding the limitations of price there can be no forward movement in the project," he said.

Fixing gas price: He shared the views of Mr Ahmed that gas price should be pegged to the prices of alternate fuels as that would determine the affordability of the buyers. Asked about the transit fee, Mr Ahmed said it was a standard charge that is applied for passage of gas through another country. "There are several formulations available. We are looking at these and will seek the help of our consultants (PricewaterhouseCoopers). It has to be reasonable and market based," he said.