Although India and Iran in 1993 signed an MOU on an overland natural gas pipeline, a variety of economic and political issues to date have blocked completion of a feasibility study. Meanwhile, in February 2002, Iran and Pakistan signed an MOU on a pre-feasibility study for a possible 1,600-mile, $3-$4 billion gas pipeline from southern Iran to southeastern Pakistan and on to India. Australias Broken Hill Proprietary (BHP) is the main foreign backer of the idea. Iran is offering to cover 60 percent of the construction costs of the pipeline. Pakistan could earn about $200-$500 million annually in transit fees from the pipeline and also would be able to purchase gas from the pipeline.
Given a thaw in India-Pakistan relations over the past couple of years, the pipeline idea is again gaining interest. Indian officials have stated that the plan could be considered if Pakistan can provide security guarantees for the $3 billion project. Two other options would be a pipeline serving only Pakistan, or separate pipelines for Pakistan and India. Gas piped from Iran to India reportedly would cost around $2.10-$2.49 per million Btu at the Indian border. There also has been discussion of extending the pipeline to China. In September 2005, India and Pakistan agreed to seek third-party verification of Irans natural gas reserves before proceeding with the pipeline project.
Another possibility would involve LNG exports to India. In January 2005, Gas Authority of India Ltd. (GAIL) and the National Iranian Gas Export Corp. signed a 30-year deal with Iran for delivery of 7.5 million tons per year of LNG starting in 2009-10. One sticking point revolves around price, with Iran asking around $4 per million Btu (based on a formula calculated off of Brent crude at around $45 per barrel), and India looking more at the $2.50 per million Btu it is paying Qatar for LNG. In the end, a compromise around $3.50 per million Btu, including shipping, was reached (although negotiations continue for additional volumes of gas above what has already been agreed upon).
In addition, NIOC offered Indian companies service contracts towards developing the Yadavaran (previously known as Kushk and Hosseinieh) and Jufeyr oilfields. Combined, Indias shares in the two oil fields will produce 90,000 bbl/d. Iran reportedly will build three LNG plants at Assaluyeh, using South Pars gas as a feedstock. If successful, LNG exports most likely would flow to Dahej, in the western Indian state of Gujarat (and/or Cochin in the southwest), either from South Pars or North Pars. The latest news is that Indias state-owned Oil and Natural Gas Corp. (ONGC) as an option for 20 percent of Yadavaran, plus 100 percent of Jufeyr.
In addition to India, China has expressed interest in LNG imports from Iran. In October 2004, Iran signed a $100 billion, 25-year contract with Chinas Sinopec for the production and export of LNG to that country (possibly 10 million tons per year), plus construction of a refinery for natural gas condensates and development of the Yadavaran oilfield. Under terms of the deal, Sinopec would have rights to purchase half of Yadavarans 300,000-bbl/d peak oil output over the 25-year contract period. However, Iran also received bids on Yadavaran from other foreign companies, so the fields status is not completely clear.
Iran is also looking to export natural gas to Kuwait, most likely via pipeline from South Pars. In March 2005, Iran and Kuwait signed a preliminary memorandum of understanding for natural gas sales, possibly 300 Mmcf/d for 25 years starting in 2007. The gas would be used for power generation and water desalination. Another possible market for Iranian gas is the UAE. In May 2004, Armenia and Iran agreed on a long-term deal, under which Iran will supply around 1.3 Tcf of natural gas to Armenia over 20 years (starting in 2007), in exchange for electricity supplies from Armenia. As part of the deal, the two countries are to build an 85-mile gas pipeline at a cost of more than $200 million (construction on the line began in late November 2004). Armenia also reportedly is looking to receive credit from Iran for building hydro plants on the Araks River in exchange for supplies of hydropower to Iran. Aside from natural gas exports, Iran also has discussed importing natural gas from Azerbaijan (a swap deal is set to kick in by the end of 2005), and already imports some natural gas from Turkmenistan. This natural gas is for use in Irans northern areas, far from the countrys main natural gas reserves in the south. In December 1997, Turkmenistan launched the $190 million Korpezhe-Kurt Kui pipeline to Iran, the first natural gas export pipeline in Central Asia to bypass Russia. According to terms of the 25-year contract between the two countries, Iran will take between 177 Bcf and 212 Bcf of natural gas from Turkmenistan annually, with 35 percent of Turkmen supplies allocated as payment for Irans contribution to building the pipeline.