Iran drives tough bargain on LNG

An indication to this attitudinal change was conveyed to a delegation of Indian state-run oil firms which was in Tehran last week to negotiate an additional 2.5 million tonnes of LNG.

Before the talks could start, an official of the National Iranian Gas Export Co told the Indian side that the new bosses had indicated that there would be changes at the micro level, while keeping the broad position intact.

‘‘The new leadership supports the policy of gas exports, but the focus may slightly shift in favour of gas supplies on priority to the neighbouring countries and the countries in the east, including India and China, vis-a-vis European countries,’’ say the proceedings of the meeting.

As for the price, ‘‘The expectations are on the higher side, particularly, considering the consistent high crude oil prices,’’ it quotes the NIGEC official.

The visiting delegation got a first-hand experience of the strategic change with the Iranians raising India’s take-or-pay liability to 98 per cent from 95 per cent that was agreed in the pact signed this June for purchase of initial 5 million tonnes of LNG. Iranian officials also informed that equity participation of Indian buyers would be lower at 5 per cent as against 10 per cent that they got for first 5 million tonnes.

However, the biggest blow came when NIGEC officials quoted a ceiling price linked to $40 a barrel when just a month ago the Iranian oil minister Bijan Zanganeh had offered a ceiling linked to $37 a barrel.

‘‘The Indian side expressed surprise that the present offer of NIGEC is much higher than the offer made by their minister (Zanganeh) to minister (Aiyar) in their last meeting,’’ say the minutes of the meeting.

However, a day later, on July 26, the Iranian team lowered the ceiling to $36, still a dollar higher than what Aiyar had suggested. It brought down the escalation rate to 1.54 per cent from originally quoted 2 per cent.

‘‘It was also stated that NIGEC is not prepared to discuss anything less than what has been offered — in view of the rigid position adopted by NIGEC team, no further progress could be achieved in the matter,’’ the minutes say.

The officials are worried that the Iranian stance could harden further when negotiations on piped gas starts sometime next year after India and Pakistan have decided on their participation in the pipeline by the end of this year.