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India plans to hold bilateral meeting with Teheran on gas issue  

The multi-billion-dollar Iran-Pakistan-India (IPI) pipeline is back on India’s agenda with the government planning to hold a bilateral meeting in Teheran on the issue after a gap of at least two years.

Petroleum secretary S. Sundareshan said the Iranian government proposed talks on the IPI to which India has agreed. The development comes in the backdrop of India’s indication of support for Iran against recent US sanctions.

“There is supposed to be a meeting of the joint working group to discuss the IPI-related issues,” Sundareshan said. “We had suggested dates in May which were not acceptable to the Iranian side. We are now given to understand that they would like the meeting in Iran. We have accepted the location and asked them to suggest dates.”

The last trilateral meeting on the IPI issue involving Iran, Pakistan and India was held in July 2007.

“What has not been understood is that the talks were stalled on the question of Iran suggesting an alternate pricing formula. There has to be further discussion on this,” Sundareshan said. “This is a major issue which is to be resolved. Once this is resolved the question of transit fee with Pakistan and transportation tariff will be taken up with Pakistan.”

Some 60 million standard cu. m a day (mmscmd) of gas likely to flow through the pipeline daily may be equally divided between India and Pakistan. The pricing formula for the gas, linked to the Japanese crude cocktail price, is for the gas reaching the Iran-Pakistan border from the source. A further price escalation is expected because of transit rights and transport tariff to be paid to Pakistan by India.

Talks on the 2,300km pipeline started in 1995, but have been delayed over price and transportation fees India would have to pay Pakistan. While India’s clinching of the civilian nuclear agreement with the US slowed the process, Iran and Pakistan decided to go ahead with the project without India, and have even extended a partnership offer to China.

“There have been no talks on IPI for more than two years. In June, the Iranians had informed us that they were interested in holding talks,” said another senior petroleum ministry official who did not want to be named.

India has recently warmed up towards Iran to court the energy-rich Islamic republic with whom New Delhi has shared uneasy ties of late. The two also recently held a meeting of the India-Iran joint commission—a panel that explores ways to boost economic ties between the two countries—after a gap of 16 months.

Iran is facing a fresh set of international economic sanctions for refusing to end its nuclear programme. Ironically, India, which is heavily dependent on energy imports, last week criticised the “extra-territorial nature” of the censures—without naming the US—saying the sanctions would “have a direct and adverse impact on Indian companies” and on India’s energy security.

While Iran has the world’s second largest oil and natural gas reserves, India is the world’s fifth largest energy consumer and imports 75% of its needs, accounting for 3.5% of global energy consumption. The trade between India and Iran, is around $15 billion.

Foreign secretary Nirupama Rao last week said that Teheran’s importance as an energy partner stems from the “natural complementarity between the needs of energy-hungry India, which hopes to grow at a rate of 8-10% in the coming years, and Iran, which is home to the third largest proven oil reserves and second largest gas reserves”.

Analysts, are however, sceptical about the pipeline becoming a reality.

“We can keep talking about it but I don't think its viable. There are some techno-commercial points that still need to be settled. One is the question of pricing and the second is the question of the physical security of the pipeline which passes through Pakistan, specifically the Baluchistan province,” said Uday Bhaskar, security analyst and head of the National Maritime Foundation.

Elizabeth Roche contributed to this story.

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