The Hindu Business Line : Iran-India LNG deal faces roadblock

Riyadh, Nov 16 Iran claims that the liquefied natural gas (LNG) deal with India has hit a roadblock due to divergent understanding of the provisions in the contract between the two countries.

The Oil Minister of Iran, Mr Gholamhossein Nozari, told media persons at the sidelines of the Third OPEC Summit, “I think there was a misunderstanding on the procedure followed for approval of such deals.”

In June 2005, India and Iran had reached an agreement to export five million tonnes of LNG to India. Elaborating on the problem being faced, Mr Nozari said, “The contract had not got the approval of the National Iranian Oil Company’s (NIOC) Board.”

As per the norms subsequent to the signing of the sale-purchase agreement (SPA) between National Iranian Gas Export Company (NIGEC) and a consortium of GAIL (India) Ltd, Indian Oil Corporation and Bharat Petroleum Corporation for export of five million tonnes per annum of LNG, the contract has to be approved by NIGEC’s parent company, NIOC, he added.

“It was mentioned in the SPA that the contract will need approval of NIOC for it to become effective,” the Minister said. He, however, did not comment on whether the deal was still alive or closed. Indications are that Iran wants a higher price for the five million tonnes per annum of LNG to be sold to India. The deal may have to be renegotiated on new price terms.

India too is seeking legal opinion on the enforceability of the LNG SPA pertaining to the 2005 deal. Iran had agreed to sell LNG to India at $ 3.215 per million British thermal unit (mBtu), but is now demanding at least $ 4.775 per mBtu in view of the sharp rise in oil prices. India has been maintaining Iran should honour the contract at the June 2005 prices and has stated that it was willing to pay the higher price for an additional 2.5 million tonnes of the fuel.

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