The Hindu Business Line : Gas pipeline: India, Pak bilateral talks begin today

Pricing formula
Final agreement on pricing formula likely to be signed by June-end.
It envisages linking price of natural gas from Iran to Japanese crude cocktail price

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New Delhi Feb. 21 India and Pakistan are expected to deliberate on issues such as transit fee to be charged by Pakistan, project structure and the mode of finance for the proposed Iran-Pakistan-India (IPI) gas pipeline project at the two-day bilateral meeting starting on Thursday.

With a broad consensus on the formula to decide on the gas price in place, official sources told Business Line the bilateral talk would try to synchronise the various issues concerning the tri-nation pipeline project.

At Secretarial-level talks between India andPakistan, Iran, the seller of the gas would be participating as an observer.

A broad consensus on the gas price formula between the buyers and seller had emerged following a trilateral meeting on the pipeline project held in January in Tehran.

The Union Petroleum Minister, Mr Murli Deora, had on February 6 said that India was agreeable to a formula on gas pricing suggested by the international consultant Gaffney, Cline and Associates. He had hoped that final agreement between the three countries on pricing formula for gas to be transported through the proposed pipeline would be signed by June-end.

The formula envisages linking the price of natural gas from Iran to Japanese crude cocktail price or Japan's average custom-cleared crude oil import price, which is about $1-1.5 a barrel higher than the Indian crude basket. The consultant has recommended linking the gas price to the average of the six-month Japanese crude basket, preceding the month of delivery.

As per reports, Iran has offered gas at $4.93 million British thermal units (mBtu) at Pakistan board. Transportation costs beyond that point would add to the price for India. As per estimates, India would pay $1.5 per mBtu (million British thermal unit) for piping gas through Pakistan and transit fee to Islamabad.

Goodwill measure

According to sources, India would be seeking waiver of transit fee to be levied by Pakistan as a goodwill measure. The proposed IPI pipeline is estimated to cost over $7 billion and will carry up to 60 mmscmd (million metric standard cubic metre per day) of gas through the pipeline in the first phase.

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