Exit Iran's oil minister, and a
pipeline too By Siddharth
Srivastava
NEW DELHI - India's quest to
expand the use of natural gas as a major energy
source has experienced several recent setbacks.
The prospects for the US$7.5 billion
Iran-India-Pakistan (IPI) gas pipeline took a big
hit with the dramatic firing of Iran's oil
minister, who had reportedly agreed to sell gas to
the two countries at a discount. Further, the
Indian government has dramatically reduced the
estimated gas reserves of recent finds that were announced
with
much fanfare.
India has also officially
made it known that prospects of obtaining gas from
Myanmar are very remote. Ending all speculation on
the matter, New Delhi has confirmed that Myanmar
has chosen to sell gas to PetroChina via a
pipeline from two blocks in which Indian firms
have stakes. India's state explorer Oil and
Natural Gas Corp (ONGC) owns 20% of each block,
while the Gas Authority of India (GAIL) has 10% of
the two assets.
The ousting of Iranian oil
minister Kazem Vaziri-Hamaneh has been a subject
of intense speculation. According to a recent
report by Reuters, one of the reasons for his
replacement was his agreement to supply natural
gas to India and Pakistan via the IPI pipeline at
a low price.
Vaziri-Hamaneh recently
rejected claims that Iranian officials had agreed
to sell gas at a 30% discount. He said there had
been no agreement on price, so no discount could
have been given. In any case, it is apparent that
the IPI project is in limbo, and a meeting between
the Indian and Pakistani petroleum ministers to
thrash out transit rates has been put off
"indefinitely".
This also puts on hold
Indian Prime Minister Manmohan Singh's and
Pakistani President General Pervez Musharraf's
visit to Tehran to ink the final IPI agreement,
which "is still a long way off", according to an
Indian Petroleum Ministry official.
There
have been other disagreements as well. India and
Pakistan recently said they are opposed to the
draft agreement on the IPI that Tehran has
submitted seeking revision of price at any time
during the contract period. Indian Petroleum
Minister Murli Deora had described the Iranian
proposal as partisan.
New Delhi was
already unhappy with Tehran's reopening price
negotiations to a deal on liquefied natural gas
(LNG) signed earlier. Recently, Iran said that it
could send its gas all over the world, and it is
up to India to decide whether it wants a share of
it.
Iran has also informed ONGC Videsh Ltd
that an agreement it signed for the development of
the Jufeyr and Yadavaran gas fields has expired.
With this, the future of India's LNG deal with
Iran that was linked to the development of the
fields is again in question.
The Iranian
government has reportedly snubbed any involvement
of Indian public-sector refiner Indian Oil Corp
(IOC) in an integrated LNG project in the South
Pars field. IOC's repeated requests to the
Petropars Oil and Gas Co for a meeting to decide
on the proposal have been unheeded.
Making
India's quest for more gas from Iran even harder
is the United States making it apparent to New
Delhi that is will not stand for any energy
relations between the two countries. Washington is
unhappy about Iran's independent nuclear
aspirations.
Projections cut India's energy problems have been compounded
by the recent declaration by ONGC and the Gujarat
State Petroleum Corp (GSPC) that finds at blocks
off the rich east coast are much lower than
initially projected.
ONGC cut its
projection of the Krishna Godavari (KG) basin find
to 2 trillion cubic feet (tcf) from the huge 21tcf
disclosed last December, said V Sibal, director
general of hydrocarbons. GSPC has lowered its
projection to 1.38tcf from the equally big 20tcf
first announced in June 2005.
These
estimates are based on initial findings, but there
is no surety now whether the earlier figures will
be reached. The latest projections put into
question New Delhi's recent claim that India will
be a gas-surplus nation in the near future.
The supply was expected to go up to 188
million cubic meters a day by 2009-10 from the
present 80, for consumption by households, the
rapidly growing auto sector and power plants. The
government had predicted that all commercial
vehicles in the country would switch to compressed
natural gas, a more environmentally friendly
alternative to gasoline, in the next five years.
India has also been encouraging power and
fertilizer plants to switch from naphtha to
natural gas to cut costs.
India imports
70% of its crude-oil requirements and is able to
meet half of its daily gas demand of 170 million
cubic meters domestically. The shortfall is
imported as LNG from countries such as Qatar.
The downgrade in gas-supply projections
also directly impacts decisions of many potential
investors. Those interested in the KG blocks
include big names such as Chevron, BP, Exxon
Mobil, Petrobras, Shell and Total. There may also
be a slowdown on bids for the seventh auction of
oil and gas areas, scheduled for this year.
Imports will continue On the
positive side, billionaire Mukesh Ambani's
Reliance Industries Ltd (RIL) is on schedule to
begin production at the KG basin by next June. In
2002, RIL discovered a gas deposit that is
estimated to be anywhere between 11tcf and 14tcf.
The company is mulling a proposal to form a 50:50
joint venture with IOC and GAIL to set up a
national gas grid.
There is fresh
excitement about the new oil and gas finds at the
Cauvery basin by Reliance, though estimates are
varied for now. Thus it seems imports will have to
continue.
Prospects of accessing
international gas sources have brightened with a
recent tie-up with Algeria for LNG, and Indian
plans to join the $13 billion trans-Saharan gas
pipeline. Turkmen President Gurbanguly
Berdimuhammedow has recently said his country is
still interested in a gas pipeline across
Afghanistan to Pakistan and India.
Last
month Deora announced that India would source 1.25
million tonnes of LNG from Algeria by 2009. ONGC
has also kicked off negotiations with the
ExxonMobil consortium for importing 8 million
tonnes of LNG from the Sakhalin gas fields.
Siddharth Srivastava is a New
Delhi-based journalist.
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