India keen to buy LNG from Iran: Pradhan

With the prospect of lifting of economic sanctions on Iran, India has expressed interest in buying liquefied natural gas (LNG) from the Persian Gulf nation, Oil Minister Dharmendra Pradhan said today.
Indian state firms had on June 13, 2005 signed a Sale and Purchase Agreement (SPA) with Natioanl Iranian Gas Export Company (NIGEC) for buying 5 million tons a year of LNG on a long-term contract at very attractive price of USD 3.215 per million British thermal unit.
But Tehran never honoured that deal.
"With the lifting of sanctions, Iran is again planning LNG liquefaction facilities. An Indian delegation visited Iran during last week of July, 2015, wherein Indian side indicated their willingness to offtake LNG from Iran," he said.

In a written reply to a question in Rajya Sabha, Pradhan said in the June 13, 2005 contract, gas utility GAIL India had committed to buying 2 million tons per annum of LNG from NIGEC while refiner Indian Oil Corp (IOC) had signed for 1.75 million tons.
Bharat Petroleum Corp Ltd (BPCL) was to take the remaining 1.25 million tons.

"The contract price for Liquefied Natural Gas (LNG) was linked to Brent crude (oil price) with a floor and cap of USD 10 per barrel and USD 31 per barrel respectively," he said.
LNG supplies under USD 22 billion deal were to start from 2010 and would have cost a maximum of USD 3.215 per million British thermal unit (mBtu) at USD 31 per barrel oil price.

The price of Iranian LNG was cheaper than the 25 year deal with RasGas of Qatar for import of 7.5 million tons a year of liquid gas. Qatar LNG, which started flowing into India in 2004, costs USD 12-13 per mmBtu currently.
Iranian LNG was also cheaper than Petronet LNG's long- term deal to import Gorgon LNG from Australia which at an oil price of USD 50 per barrel would come for USD 7.25 per mmBtu.
"According to the side letter signed along with the contract, NIGEC was required to obtain approval of National Iranian Oil Company (NIOC) for the LNG SPA within 15 days. However, NIGEC neither secured this approval nor implemented the LNG SPA," Pradhan said.

Officials said primarily the June 2005 deal was not honoured as there was a change in regime in Iran after Mahmoud Ahmadinejad took over as President.
The new government sought review of price and delayed NIOC board approval. India, on the other hand, sought legal opinion on enforceability of the SPA.
International law firm Gide Loyrette Nouel of France, which had earlier vetted the LNG SPA as per English law, stated that the Side Letter to the SPA (in which the approval of NIOC Board being mandatory for the deal was mentioned) does not amend the Agreement and NIOC's approval would not constitute a 'Condition Precedent'.

Accordingly, the LNG SPA remained enforceable.