India to import LNG from Iran, acquire oilfield stake

By an OGJ correspondent

MUMBAI, May 16 -- India and Iran have agreed in principle for India to import 5 million tonnes of LNG in phases from Iran under a 25 year contract.

In addition, India, through ONGC Videsh Ltd. (OVL), the overseas subsidiary of state-owned Oil & Natural Gas Corp., will acquire equity in certain discovered oilfields in Iran.

"These were the two key areas discussed in the 3-day talks in Tehran during the first meeting of the Indo-Iran joint working group on the hydrocarbon sector," said India Petroleum Minister Ram Naik, who led the delegation to Iran.

"The commitment for LNG imports will go a long way towards meeting India's gas requirements, which at the moment show a large shortfall of 50%," he said, adding, "The commercial terms of the LNG imports will be worked out later."

Under the agreement, India will receive 2.5 million tonnes of LNG in 2007-08 and an equal quantity beginning in 2012. India and Iran also have agreed to give Indian oil firms equity in discovered oil and gas fields, Naik declared.

New import terminals
To facilitate the imports, the Indian government is expected to build another LNG import terminal on the country's west coast to receive and process the LNG. If built, it would be the fourth on the western coast after Petronet LNG's 5 million tonne terminal at Dahej in Gujarat, Royal Dutch/Shell's Hazira project, and the Dabhol project of failed US energy major Enron Corp. Petronet also is setting up a 2.5 million tonne LNG import terminal at Kochi, in Kerala, on the southernmost tip of the country.

Other accords
In addition to the LNG agreements, India's government-run Gas Authority of India Ltd. (GAIL) will assist Tehran in developing a compressed natural gas network for use as automobile fuel, while Indian Oil Corp. (IOC) will lend its expertise in modernizing Iranian refineries and increasing their capacity utilization.

Although it has been reported that GAIL would work with the National Iranian Oil Co. (NIOC) on feasibility studies for a deepwater pipeline, the India-Iran discussions sidestepped the sensitive issue of the proposed Iran-India pipeline. No decision was made on either a deepwater or an on-land pipeline originating in gas-rich southern Iran.

However, IOC has renewed its contract with NIOC to import 5 million tonnes of crude oil during the financial year 2003-04.

Of the 8.45 million tonnes of crude oil imported from Iran, 5 million tonnes is imported on a government-to-government term contract basis, and the rest is bought from the spot market.

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