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India has offered to invest over $1 billion in building a plant to liquify natural gas in Iran so as to cut the cost of the liquefied natural gas from Iran to almost the same levels as that of subsidised natural gas in India.
The offer to build the liquefication plant was made by state-owned gas firm Gas Authority of India Ltd, the leader of the consortium of public sector oil companies for import of 5 million tonnes per annum of LNG from Iran, at a meeting in Tehran earlier this month, industry sources said.
GAIL is trying to hammer down the gas price, including the liquefication cost, to just over $2 per million BTU (British Thermal Unit) so that the delivered cost of the regassified LNG in India is around $3 per million BTU.
India's maiden LNG imports from Qatar are priced at $2.53 per million BTU and after including shipping cost of 26 cents, customs duty of 5 per cent, regassification cost of 44 cents, pipeline transportation cost and local levies, the delivered cost to customer is around $4 per million BTU.
Sources said the consortium is urging Iran to fix the gas price through a mix of fixed and variable cost. While two third of the gas price may be static or fixed throughout the tenure of LNG imports, the remaining one-third may be linked to Brent crude oil.
This is in contrast to Qatar offering gas at a price equivalent to $20 a barrel for the first five years of the 25-year contract and later shifting to $16-$24 a barrel price band.