Iran may put LNG deal on backburner

Iran may put the $22 billion deal to sell liquefied natural gas to India on the backburner as New Delhi refuses to re-open the contract sealed two years ago, according to an assessment by the petroleum ministry.

In a report to the Prime Minister's Office on his meeting with Iranian President Mahmoud Ahmadinejad last month, Petroleum Minister Murli Deora said Tehran has assured it was committed to the Iran-Pakistan-India pipeline project and the LNG contract on equal terms.

But the ministry's assessment was Iran would prioritise the IPI project and continue to push for a renegotiation of the LNG deal on the price or will put in on backburner, Deora said in the report.

Sources said Deora told Ahmadinejad that Iran should supply 5 million tons a year of LNG at the June 2005 agreed price of $3.215 per million British thermal unit (mBtu) and New Delhi was willing to pay a higher price for an additional 2.5

million tons a year of LNG.

The June 2005 contract had LNG prices linked the Brent crude oil price with a cap at $31 per barrel. Now Iran wants to raise this ceiling to $55, raising the LNG price to $4.78 per mBtu.

India, sources said, has offered it is willing to pay $4.78 per mBtu for additional LNG, thereby averaging the cost for 7.5 million tons of LNG to $3.74 per mBtu.

Tehran was willing to honour the June 2005 price only if the additional 2.5 million tons bought at $7.92 per mBtu, so as to average the price to $4.78 per mBtu.