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Rediff.com  » Business » Indo-Iran LNG import deal in peril

Indo-Iran LNG import deal in peril

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October 25, 2005 14:53 IST

India's $22-billion deal to import 5 million tonnes of liquefied natural gas from Iran is in trouble after General Electric of the United States refused the supply of crucial equipment needed to make LNG to Tehran.

GE has refused to supply compressors, a crucial link in converting natural gas into liquid for transportation in ships, to Iran, industry sources said.

German firm Linde had also refused liquefaction technology to Iran. As such Iran cannot access commercially proven LNG liquefaction technologies due to US sanctions on Tehran. The only two commercially proven LNG liquefaction technologies are of US origin and the sanctions preclude US-based firms from associating with projects in Iran.

Sources said Iran was banking on yet to be commercially tested 'MFC' process of Linde and 'Liquefin' process of Axens (a wholly owned subsidiary of IFP of France) for liquefaction of natural gas produced from gigantic South Pars fields in the Persian Gulf.

While the French liquefaction technology is the only hope for Iran, Tehran is now talking to Ukraine for their sourcing compressors. Ukranian compressors are however not very energy efficient and may push up liquefaction cost.

Trouble in sourcing technology may delay the first LNG consignment to India by at least two years to 2012, sources said. National Iranian Oil Co, which owns the South Pars gas field, was to approve the LNG export deal to India within three weeks of signing of the sales purchase agreements between Iran's gas export firm NIGEC and India on June 12 but is yet to give its stamp of approval.

Sources said NIOC approval for the $22-billion deal was to come by July 5 but it has sought more financial details of the proposal.

Tehran is pitching for the French technology by awarding a huge block in South Pars field to French firm Total for production of LNG and export.

India wants to import 5 million tonnes per annum of LNG beginning 2009-10 from Iran to supplement its domestic natural gas production, which barely meets half the current demand.

In June, three separate SPAs were signed between National Iranian Gas Export Co and GAIL India Ltd (2 million tonnes per annum), NIGEC and Indian Oil Corp (1.75 mtpa) and NIGEC and Bharat Petroleum Corp Ltd (1.25 mtpa).

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