India, Pakistan, Iran agree on "price formula" for IPI project
New Delhi, July 16, IRNA - Iran news agency
www2.irna.com/en/news/view/menu-234/0707162027113325.htm

India, Pakistan and Iran have agreed on a "price formula" that will govern
the cost of gas through the Iran- Pakistan-India (IPI) gas pipeline based on
the price of natural gas in Japan, which they have accepted as the most
suitable yardstick.

Japan currently accounts for half the natural gas consumption of the world
and its energy market is not as erratic as others.

According to an Asian Age report, the special representative of the Iranian
minister of oil on IPI and director of international affairs in the oil
ministry, Hojatollah Ghanimifard, said in remarks that a model had been
worked out so that "when the contract is signed, no set figure would be
mentioned and the
price will be calculated according to the said formula.

"For example, if gas is to be transferred four years later, at that time, we
would introduce the price of Japan's imported crude oil, not when the
contract is signed."

He said that the agreement on the inclusion of a price line in the contract
has been a major achievement in the last round of trilateral negotiations.

The main hitch, according to Ghanimifard, is the inability of India and
Pakistan to reach a final conclusion on gas duties. He said a decision had
been taken to resolve this at the petroleum ministers' level, with
indications that Murli Deora will now visit Islamabad to finalize the
details.

This will be a crucial meeting and was expected to be held this month
although no dates have been fixed as yet, particularly as a bilateral
agreement on gas duties between New Delhi and Islamabad is essential for the
trilateral contract to be finalized.

The three countries, according to the Iranian official, have made a decision
to sign only one trilateral contract which Iran is reportedly ready to
present as soon as India and Pakistan clear the main hurdle on gas duties.

According to him, both the Indian and Pakistan delegations had indicated at
a meeting which had been attended by petroleum minister Murli Deora that
negotiations with Pakistan should end in July.

India wants to pay duty for only part of the gas pipeline on Pakistan's
territory as the latter is using the gas as well.

Pakistan has raised objections to this, and the deadlock, according to
participants, can be broken only at the ministerial level.

The three governments have resolved most of the initially- identified 16
points of difference and, according to Ghanimifard, only "five to six
controversial paragraphs remain to be discussed".

Apart from the gas duties, the delivery point also has been decided along
the border with Pakistan.

"Of course the delivery point has not been decided technically, but the
distance over which the pipeline should travel from Iranshahr to Pakistan
has been determined and it will not take long to finalize that route," the
senior Iranian official clarified.

Agreement has also been reached on the companies that should sign the
contract.

Ghanimifard said, "After the final result of the negotiations between India
and Pakistan for determining gas duties and the name of the Pakistani and
Indian companies are announced, we will announce the name of the Iranian
companies that will sign the contract." He made it clear that the contract
for building the IPI gas pipeline will be concluded according to the price
formula and no set price will be introduced.

This will be determined only at the time that the gas is transferred to the
pipeline.

He added that he would have disclosed the details of the price formula had
it not been for the fact that India and Pakistan did not want to disclose it
at this stage.

Iran is visibly enthusiastic about the sudden progress on the long-stalled
pipeline, with an invitation already having been extended to Prime Minister
Manmohan Singh and Pakistan President Gen Pervez Musharraf to visit Tehran
for signing the contract.

New Delhi and Islamabad are tightlipped, and reporting progress have not
been forthcoming with the details as both countries are under US pressure
not to do business with Iran in the energy sector.

However, as experts here pointed out, if India is serious about its
commitment to energy security, it cannot do so without mopping up resources
from all available quarters.