Iran-India gas pipe to cost $7-8 billion - govt official Wed Jul 13, 2005 2:15 PM GMT
By Himangshu Watts
NEW DELHI (Reuters) - India's oil ministry has estimated a proposed gas pipeline from Iran to Pakistan and India is expected to cost $7-8 billion, a government source told Reuters on Wednesday.
The project to pipe gas from OPEC member Iran to energy-hungry India was earlier expected to cost $4 billion.
"That was an old estimate. Taking into account inflation, the large increase in steel prices, we think the project will cost $7 billion to $8.1 billion," he said.
The proposal to build the pipeline has been discussed for years but uneasy relations between nuclear rivals Pakistan and India prevented progress.
But the plan gained momentum after a peace process between the South Asian nations began last year.
The project's cost, legal framework to guarantee supplies and the possible route were discussed during the first meeting of the India-Pakistan Joint Working Group on pipelines in New Delhi.
Pakistan's petroleum secretary, Ahmad Waqar, said he wanted the project to be completed by 2010, after which his country would be short of gas.
India has suggested the pipeline should initially bring 60 million cubic metres of gas a day in the first year, which should be upgraded to 90 million cubic metres in the second year and 120 million in the third year.
Officials said that National Iranian Gas Export Co. and National Iranian Oil Co. along with Indian, Pakistani and international companies may own and operate the pipeline but several options would be considered.
A joint statement issued on Wednesday after the talks said discussions would be resumed in Islamabad next month, when India would present a draft agreement to finalise the contract.
Both countries also agreed to appoint separate financial and legal consultants by the middle of September, an Indian official said.
Indian officials said the pipeline tariff would be about $0.80 per million British Thermal Units if the project had a return on capital employed of 12 percent, and $1.35 if the return on capital employed was 20 percent.
Last week, Iranian Oil Minister Bijan Zanganeh said in Islamabad work on the project could start in 2006.
Doubts have been cast over the pipeline after U.S. Secretary of State Condoleezza Rice, on a recent trip to Asia, expressed concern, stemming from U.S. opposition to Iran's nuclear programme.
Pakistan and India, seeking energy sources to fuel rapid economic growth, are also considering a gas pipeline from Turkmenistan through Afghanistan, but poor security in Afghanistan is likely to delay that project.
India, which imports 70 percent of its crude oil and produces barely half the gas it consumes, is also hunting stakes in foreign oil projects and importing liquefied natural gas to meet the energy needs of its growing economy, Asia's third largest.
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