NEWS
Indians say Iran contract deadlocked on price
New Delhi, Aug 3 (LNG journal)
- Indian officials say Iran is seeking higher prices for a deal to sell an additional 2.5 million tonnes per annum of liquefied natural gas after the two countries sealed a contract worth $22 billion for 5m tonnes per annum of LNG.
In contrast to its earlier ceiling of $3.22 per one million metric British thermal unit (mmbtu) at $31 per barrel of Brent crude (for 5m tonnes per annum), Iran is now seeking $3.54 per mmBtu at $40 per barrel Brent with a 1.5% annual increase in the ceiling price for the full contract term of 25 years, the Indian financial press reported, citing members of the negotiating team.
In Asian LNG purchases, prices are linked to imported crude oil. The pricing formula typically includes a base price indexed to crude oil prices, a constant, and perhaps a mechanism for the review/adjustment of the formula.
According to Indian officials in the Iran negotiations, this would give a FOB (loaded) price of $4.1 per mmBtu at a Brent price of $50 a barrel and $4.5 per mmBtu for a price of $57 a barrel.
After adding the customs duty element ($0.18 per mmbtu), re-gassification costs ($0.35 per mmBtu) and transport costs ($0.30 per mmbtu), the delivered price of LNG would vary between $4.93 per mmbtu to $5.33 per mmBtu, the reports said.
This $4.93-$5.33 price spread compares with the CIF (delivered) LNG price under the existing 5m tonnes per annum deal with Iran of $ 4.05 per mmbtu.
Indian officials, who visited Tehran last week, to try and complete a deal for 2.5m tonnes per annum more of LNG said they failed to break the deadlock on price, the reports said.
