Announcement

Collapse
No announcement yet.

Mega Deal - Implications

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Mega Deal - Implications

    India and Iran sign $40b LNG deal

    * Delhi will import 7.5m tonnes LNG a year starting 2009 and running for 25 years

    NEW DELHI: India has signed a $40 billion deal with Iran to import liquefied natural gas and join in developing three Iranian oilfields.

    A joint statement said India would import 7.5 million tonnes a year (tpy) of LNG starting 2009 and running for 25 years.

    Every last detail has been settled, price too,” said Indian Oil Minister Mani Shankar Aiyar after talks with his Iranian counterpart, Bijan Zanganeh, on Friday.

    An Indian government official put the price tag of the deal at $40 billion although there was no official confirmation of the figure. The statement said India’s ONGC Videsh Ltd and the National Iranian Oil Company (NIOC) had agreed a preliminary deal for Indian firms to participate in the Yadavaran and Jufeyr oilfields through service contracts.

    Iran has been pursuing a series of LNG purchase agreements, which reward potential buyers with upstream participation in fields in OPEC’s second biggest oil producer. India’s participation in the Yadavaran field, estimated to hold 3 billion barrels of crude, will be 20 percent, or the equivalent of 60,000 barrels per day (bpd).

    “China will be the operator and India will have 20 percent,” Mr Zanganeh told reporters. India’s participation in the Jufeyr oilfield would yield about 30,000 bpd. Indian firms, led by ONGC Videsh, the overseas arm of state-run Oil and Natural Gas Corp, would take 100 percent of the Jufeyr project. Mr Zanagneh said the service contracts were identical to Iran’s long-standing buy-back agreements under which field developers recoup their investments with production from the project
    . Talks between India and Iran broke down in late November after a difference on the pricing of the LNG (natural gas super-cooled to liquid form for export on tankers).

    Friday’s agreement was signed after talks this week between Middle East oil producers and Asia’s biggest consumers — China, Japan, India and South Korea. New Delhi estimates that oil demand will rise by 4 percent this year compared with an increase of roughly 5 percent in 2004. The statement said that the LNG part of the deal was signed between gas transporter GAIL India Ltd., Indian Oil Corp Ltd. (IOC) and the National Iranian Gas Export Corp.

    It said that Iran’s Petropars and IOC planned to submit a joint proposal for development of an upstream block on the South Pars gas field and for a 9-million-tpy gas liquefaction plant by the end of February.
    reuters
    _____________________


  • #2
    And the economy shall boom! ;)

    More the number of foreigners in Iran, better is the HUMINT.

    Note: No US objections.


    "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

    I don't have to attend every argument I'm invited to.

    HAKUNA MATATA

    Comment


    • #3
      Ray

      Perhaps this news gives us some context for the item I posted about the Saudi offering long term supply agreements to India.

      I think this deal is huge - gas is enabler of a strategic shift, much as the shift from coal to oil was - I hope Islamabad will consider this carefully.
      _____________________

      Comment


      • #4
        Has India’s LNG deal upstaged the overland pipeline?

        Even as India and Pakistan were trying to smoothen differences on an overland oil and gas pipeline from Iran, New Delhi has gone ahead and cut a $40 billion deal with Iran over the next 25 years on LNG (liquefied natural gas). Is this the end of the Pakistan pipeline issue?

        On the surface it does look like it. When Prime Minister Shaukat Aziz was in India in November last year, the Indians linked the overland pipeline with Pakistan granting them MFN status. Mr Aziz dismissed the linkage and noted that Pakistan needed the pipeline for its own domestic consumption and would go ahead with it regardless of India. However, he said that India must inform Pakistan of its decision because that would determine the technical parameters of the pipeline.

        Now India has made clear that it will play hardball on the issue. There are reasons for it. The normalisation process aside, India is not prepared to let Pakistan go one-up on it. When its security experts rejected the overland pipeline option in the late nineties, it began work on LNG. By now, it has already spent a major chunk of the upfront cost of carrying the LNG and de-compressing it. Also, the deal just signed gives India 20 percent stake in upstream participation in the Yadavaran and Pars fields. Moreover, in the current deal, the price has been worked out over the entire period until 2036. This could help offset the cost of fluctuating prices that would attend an overland pipeline. Similarly, India has developed a fleet of its own ships to carry LNG. Given all these costs as well as working out security risks, it does seem like the LNG option may be good for India
        .

        But there’s a catch. We do not know how India has worked out its rate of growth and the rate of consumption over this period. If those calculations go awry whether on the plus or minus side, the LNG option could prove far more expensive than an overland pipeline. Experts say India’s requirement is likely to increase more than it has determined at this moment. If that is correct then we could expect India to try and work two options: LNG as well as an overland pipeline. It has started with LNG because that gives it a better handle on negotiations with Pakistan over the pipeline. Since the LNG project would kick off in 2009, there is time still for India to drive a hard bargain with Pakistan. As for Iran, all the deals work to its advantage. It has signed the LNG deal with India and China and has signed one with Pakistan on the pipeline. If India involves itself in the pipeline deal at some point in the near future, Iran gets more, not less.

        We do not know if the Pakistani government was alive to this possibility coming on the heels of Mr Aziz’s statement last November. We also do not know if Islamabad has formulated a viable response to this development. However, one thing is obvious: Pakistan took an ill-advised decision in the late nineties to not take the option seriously. If the transit pipeline does not work out, Pakistan would have enough gas for its domestic consumption, whether it is through Iran or Turkmenistan, but nothing to show in royalties. That India could work the LNG option should also have been clear from how Egypt used it to export gas to Turkey to avoid an overland pipeline through Israel
        _____________________

        Comment


        • #5
          India's Petroleum Minister, Mani Shnkar Aiyer is a colourful guy. He is ex Indian Foreign Service.

          He is a great chum of the Islamic nations. He is on best terms with Pakistan, Iran and I am really surprised, with Saudi Arabia, now! I read in the newspaper something about an deal for oil with the Saudis. As I said economics was never a charm for me. Too complicated.

          However, it shows that personal equations sometimes overrides many other considerations! ;)
          Last edited by Ray; 09 Jan 05,, 03:12.


          "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

          I don't have to attend every argument I'm invited to.

          HAKUNA MATATA

          Comment


          • #6
            May I add to the pipeline

            The latest development on Indo-Iranian pipeline.


            India threatens to dump Iran-India pipeline

            March 16, 2005 16:07 IST

            India on Wednesday threatened to pull out of the proposed $4.16 billion Iran-India pipeline project over price of natural gas saying Tehran has to price the fuel at rates affordable to industry in India.

            "We will not buy gas from Iran if we cannot sell it in India. If they say they have alternate markets in the United States, China and Japan (who are willing to pay higher price) than I might as well ask them to tap them," Petroleum Minister Mani Shankar Aiyar said at book release function in New Delhi.

            Iran wants a price equivalent to that of liquefied natural gas for the natural gas it plans to sell to India by the pipeline which would pass through Pakistan.

            "In our country, paying capacity of (key consumers) power and fertiliser sector has kept in mind for pricing of the feedstock (gas). We can buy the energy provided we can afford the price," he said.

            LNG is twice as costlier than domestically produced natural gas.

            Aiyar said India and Pakistan together need some 200 million standard cubic meter per day (mmscmd) of Iranian gas and Tehran has to offer special price to such large consumers.

            The power and fertiliser industry in India are not willing to pay a doorstep price of more than $3 per million British thermal unit (mBtu). In comparison, Iranian demand of a price equivalent to the price of regassified LNG came to about $4 per mBtu. Adding transportation and transit charges (to be paid to Pakistan for the length of pipeline that would pass through its territory), the delivered price would come to over $4.50 per mBtu.

            Aiyar warned that euphoria on the pipeline diplomacy was over and said: "The road ahead is rocky."

            "There is the cost of (natural gas) production, than the cost of transmission and cost of transit and over that profit to be made. If these add up to a sum we can afford to buy, we will buy," he said.

            "Our affordable price may be lower than available elsewhere but Iran has to be sensitive to our market," he said.

            International consultant BHP Billiton of Australia had pegged cost of Iranian gas through a pipeline at $2.40-2.49 per mBtu.

            Besides the high price of the 'lean gas' (natural gas stripped of petrochemicals), Iran was also not willing to sign 'supply-or-pay' contract, which would make it liable to deliver the gas at Indian borders or else pay for the assured quantity.

            Tehran, however, wants New Delhi to commit to a stringent 'take-or-pay' clause where India will have to pay the price even if it does not take delivery of gas.

            The 2600-km long pipeline would originate at the Persian Gulf port city of Assaluyeh (the landfall point of gas produced in South Pars gas fields) and travel 1100-km in Iran to reach Pakistan border. In Pakistan, the pipeline will traverse 760-km to reach Indian border. Another 700-km line would be laid from Rajasthan border to Delhi to stream the gas into the trunk HBJ (Hazira-Bijapur-Jagdishpur) pipeline.


            source :
            From rediff

            ******************************

            I was pretty pleased to hear about this news.

            Contrary to popular belief and different from oil reserves, natural gas is rather widely available the world over. Infact the countries struggle to export it.

            Indias demand has risen mostly due to consumption (as LPG & CNG) in households and automobiles. Unlike the developed countries like US which rely solely on electric stoves for cooking and petrol for automobiles (let alone CNG, even the diesel powered vehicles are a no-go) the use of natural gas is highly marginalised. India cannot afford electric stoves for cooking, not before they make sure they have utilised all the available hydro-electric resouces.

            some facts to support my opinion.

            source: natural gas

            Global Abundance
            Natural gas resources are widely and plentifully distributed throughout the world. At current consumption rates, many countries have several decades, if not centuries, of estimated natural-gas resources.

            A recent U.S. Department of Energy study reports that recoverable reserves and resources of natural gas in the lower 48 states total 1.295 trillion cubic feet, more than a 70-year supply at current production levels. Most of these reserves are recoverable at prices below $3.50, so the country is in no danger of running out of natural gas any time soon. Most U.S. gas demand is met by domestic production. In 1992, 9.2% of U.S. natural gas consumption was met by imports, virtually all arriving by pipeline from Canada. The low level of U.S. imports is typical of the natural gas markets worldwide. While nearly 50% of world oil production crosses a country's borders, only 16% of the world's gas production does so.

            ************************

            So my honest opinion.

            Oil is good. But we as Indians should think twice before committing ourselves to buying foreign electricity & gas. Especially when we are severely under-using our hydro potential at mere 8%

            I understand that there have been bad experiences like Tehri and Narmada which have made us all wary but a careful scientific planning can easily address all environmental issues. We must look to our successes like Nathpa Jhakri to show us the way.
            Last edited by affinor; 16 Mar 05,, 13:29.

            Comment


            • #7
              most important question, will the pipeline be going thru Pakistan?! :D

              Comment


              • #8
                How else can the pipeline go? Can it go through the Arabian Sea? Just wondering.

                Comment


                • #9
                  that was something India wanted, Iran was not prepared to do that.

                  Comment


                  • #10
                    Originally posted by platinum786
                    that was something India wanted, Iran was not prepared to do that.
                    India would be needing atleast 45 Bn cubic meters by 2015.

                    At present these are the projects in place.
                    1.Petronet of India ties up with Qatar's Ras Laffan LNG Company (Rasgas) signed an agreement for the provision of 10.3 billion cubic meters per year of LNG, and deliveries began in January 2004, according to the Energy Information Administration.

                    2.Indian Petroleum Minister Aiyar visited Moscow and Kazakhstan in late February to discuss energy issues. He reportedly said that India is willing to pay $2 billion for a 15 percent stake in Yuganskneftegaz, "The Financial Express" reported on 12 March.

                    3.He also said India could invest $25 billion in the entire Russian energy sector.

                    The main hurdle is regarding the price at which iran is ready to supply it to india.the price they are quoting is USD 4 per MBTU while the current prioce of it india is USD 3 MBTU.
                    Iran natural-gas reserves is an estimated 26.6 trillion cubic meters, according to the Energy Information Administration, but the country only produced about 76.5 billion cubic meters of natural gas in 2002. Most of that gas was used domestically, although Iran did export to Armenia and Turkey.So a abundant reserves could force iran to reduce the price of it to what india needs it and then look at the next step.
                    What's the difference between people who pray in church and those who pray in casinos?
                    The ones in the casinos are serious.

                    Comment

                    Working...
                    X