Energy Sector - 2

[Naresh]

<b>India opposes IPI penalty proposal</b>

<i>* Iran wants amendment to GSPA force majeure clause, replacing ‘act of war’ with ‘situation of armed conflict or war’</i>

<b>NEW DELHI : India has opposed Iran's bid to include a clause in the proposed Gas Sales and Purchase Agreement (GSPA) of the Iran-Pakistan-India gas pipeline project to absolve itself from paying penalties for disruption and non-supply of natural gas due to armed conflict. With US strikes inside Pakistan increasing and a possible strike against Iran, Tehran wants to absolve itself from supplying gas through the tri-nation pipeline in the case of conflict.</b>

An amendment clause is being opposed by New Delhi, which wants Tehran to make alternative arrangements like shipping gas in liquefied form (LNG) in the event of disruption of supply.

Negotiations on the $7.4 billion pipeline have been long and tedious with each side wanting to protect its interests. With most of the issues now settled, the new condition would further delay agreement on the project.

Official sources said Iran had suggested an amendment to the force majeure clause that sought to include its enforcement in the situation of armed conflict or war. It wants the term ‘Act of War’ under excusing event to be replaced by a suitable substitute such as ‘situation of armed conflict or war’ in the GSPA.

But India wants Iran to pay for non-supply of gas in situations other than war. Tehran, it says, has to commit to the principle of 'supply or pay' as the buyers are agreeing to a 'take or pay' clause.

<b>The sources said India also wanted the ownership of natural gas to be transferred to it at the Pakistan-India border and that Iran should be liable for safe passage of the fuel in Pakistan. India has said it will pay only if gas is delivered at its border. Iran has proposed to transfer gas ownership at its border with Pakistan and wants New Delhi and Islamabad to enter into agreements for onward transit of fuel.

New Delhi also opposes Tehran's insistence on revising the gas price every three years. It believes the pricing formula agreement between the three nations was for the entire 25-year tenure of the project.</b>

India and Pakistan are to buy 30 million standard cubic metres per day of gas each from the proposed pipeline.

Earlier, in September, Tehran had expressed serious concerns over the security situation in Pakistan and asked Islamabad to make security a part of the IPI project.

Iran had demanded from Pakistan to include a provision on security in the GSPA for the gas pipeline project. With such a provision in the IPI gas pipeline project, Tehran was to be able to suspend gas supply to Pakistan in case of ‘a security incident’ in the country.

In June, India and Pakistan has declared they had reached a consensus on the transit fee of the IPI pipeline.

<b>India wanted the gas pipeline to operate like the proposed Turkey-Austria Nabucco gas pipeline that is exempted from gas transit fee.</b>

Cheers <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->