The Hindu : International : Aiyar in Teheran, deal on purchase of gas likely

Online edition of India's National Newspaper
Sunday, Jun 12, 2005

International

International

Aiyar in Teheran, deal on purchase of gas likely

Atul Aneja

The agreement envisages supply of five million tonnes of gas annually

2,600-km pipeline proposal on the agenda

Will brief Iran on talks with Pakistan

MANAMA: After stating India's intent to buy oil produced in the Caspian Sea basin, Petroleum Minister Mani Shankar Aiyar has begun his visit to Iran as part of an effort to find ways to funnel Persian Gulf gas into the subcontinent.

Mr. Aiyar arrived in Teheran on a three-day visit, which will focus on a 25-year agreement on the purchase of five million tonnes of Iranian gas annually. The deal is likely to be finalised during his stay. Negotiations have also been underway about Iran raising the export volume to 7.5 million tonnes annually.

With the deal nearly closed, India is poised to expand its gas purchases from the Persian Gulf as it has already entered into an agreement with Qatar for the supply of similar quantities of gas earlier. In both cases Liquefied Natural Gas (LNG) will be shipped to Indian shores. With deposits of 23 trillion cubic meters, Iran, followed by Qatar, has the second largest gas reserves in the world.

Discussions on the proposed 2,600-km Iran-Pakistan-India pipeline are on Mr. Aiyar's agenda. He is expected to propose the possible participation of Indian Oil Corporation and Gas Authority of India Limited (GAIL) in the venture. He will also brief the Iranian side about his recent talks with Pakistani authorities on this subject.

The $ 40 billion gas deal with Iran is complex as it allows Indian companies to operate in Iran's oil and gas sector, and gives them a direct foothold in the area. India's long-term purchase of natural gas has been tied up with its participation in developing one gas field and two oil fields in Iran. As part of the deal, India's ONGC Videsh Ltd (OVL) will get a 20 per cent share in the development of Yadavaran — Iran's biggest onshore oilfield. It will also get exclusive rights in the 300,000-barrel-per-day Jufeir oilfield. The stake in Yadavaran will mean that India will have access to 60,000 barrels of oil per day.

The arrangement has significant geopolitical connotations. Faced with U.S. attempts to seek its economic isolation, analysts see the proposed deal as Iran's response to the move, based on a "look east" policy that is cemented by energy tie-ups with India, China and Japan.

Significantly, the Chinese State oil company Sinopec (China National Petroleum and Chemical Corp) will operate the Yadavaran field, with a 50 per cent shareholding. Apart from the Indian stake in this field, Iran will retain the remaining 30 per cent share, anchoring a three-way tie-up involving Beijing, New Delhi and Teheran. With an eye on the Persian Gulf's gas reserves, Mr. Aiyar will travel to Qatar after completing his Iran visit on June 13. There, he is expected to explore the possibility of extending the proposed Gulf -South Asia (GUSA) pipeline to India. As of now the proposal envisages construction of a 1,186-km pipeline from Qatar to Pakistan, through the United Arab Emirates.

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