Indian state firms had on June 13, 2005 signed a Sale and Purchase Agreement (SPA) with <g data-gr-id="38">Natioanl</g> Iranian Gas Export Company (<g data-gr-id="39">NIGEC</g>) for buying 5 million tons a year of LNG on a long-term contract at very attractive price of $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 <g data-gr-id="41">July,</g> 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 <g data-gr-id="31">NIGEC</g> 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 $10 per barrel and $31 per barrel respectively," he said. LNG supplies under $22 billion deal were to start from 2010 and would have cost a maximum of $3.215 per million British thermal unit (mBtu) at $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 $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 $50 per barrel would come for $7.25 per mmBtu. "According to the side letter signed along with the contract, <g data-gr-id="42">NIGEC</g> was required to obtain approval of National Iranian Oil Company (NIOC) for the LNG SPA within 15 days.
However, <g data-gr-id="35">NIGEC</g> 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 <g data-gr-id="34">enforceability</g> of the SPA.