IPI gas pipeline may get stuck again as Iran seeks revision of pricing formula

16 Sep 2008

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Mumbai: Iran has sought a change in the gas pricing formula and tariff for gas to be supplied through the Iran-Pakistan-India (IPI) pipeline, citing high international prices of oil – a move that could lead to further delay in the $7.4-billion project.

Tehran has demanded a revision in the Gas Sales Purchase Agreement (GSPA) between Islamabad and Tehran. The two sides had decided to link the gas tariff with the Japan crude cocktail price.

While Pakistan holds a revision in the gas price would be possible only after four years, Iran says it wants to revise the formula after three years, the Daily Times quoted petroleum ministry sources as saying.

The project has already been delayed by the failure of India and Pakistan to resolve the issue of gas transit fee. A committee formed by the Iranian President to resolve the transit fee issue between Pakistan and India had also failed to find a solution.

Pakistan had insisted on 60 cents per million British Thermal Units (MMBTU) transit fee during talks between the petroleum ministers of the two countries on 25 April. New Delhi, however, was unwilling to give over 15 cents per MMBTU transit fee to Islamabad on transmission to India.

Pakistan and Iran will discuss the gas pricing formula in Tehran later this month during a meeting, which is also likely to discuss issue of transit fee between Pakistan and India.

Both Pakistan and India had sought a fixed price formula for the gas imported from Iran, but the new caretaker government in Pakistan had agreed to a periodic revision of gas prices.

The new demand by Iran would further delay the gas pipeline project and raise its cost from the estimated $7.4 billion.

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