A status report from the petroleum ministry has sought a review of the 2005 Cabinet approval on the Iran-Pakistan-India (IPI) pipeline, citing the stand-off with Iran on pipeline security and gas pricing as well as the increased domestic availability due to start of Reliance Industries’ Krishna-Godavari D6 (KG D6) field.

“There is a need to develop a common understanding of the project and to evolve (an) agreement on the path ahead amongst the stakeholders. The ministry proposes to convene a meeting with concerned ministries/ organisations such as Ministry of External Affairs, National Security Council Secretariat. Subsequently, the issue could be put for decision to Cabinet Committee on Security, if necessary,” the note says.

In February 2005, the Cabinet approved India’s participation in the IPI pipeline provided gas was delivered at India’s border to ensure supply security for downstream investments. To that end, New Delhi suggested a trilateral mechanism with suitable penalty measures to provide for defaults. It clarified that while there should be payment guarantees in the event of supply failure, India’s liability should be limited to taking the gas as per contract.

It also pitched for the Pakistan leg of the pipeline being built by “a consortium of technically competent and financially capable international companies with experience in implementing similar projects” with GAIL (India) getting an equity in that project segment. However, even as these and other supply issues remained unresolved, Tehran sprung a new gas pricing formula in January 2008 with a clause that the price from the new formula should not be less than the average price it charges other countries. India contends that the price formula agreed between Iran and Pakistan in January 2007 should be adhered to.

While highlighting these bottlenecks to the concerned ministries and organisations, the ministry has submitted that “the production from KG D6, along with increased availability of re-gasified LNG, would be able to cater to the existing shortfall of natural gas across all sectors”.

But in projecting for the future, it says “there is no ceiling on the demand for natural gas” and there was “substantial scope for increase in demand for this clean and inexpensive source of energy” as gas pipeline infrastructure develops in the country.

The ministry has also suggested that the price of IPI gas be compared with sources other than indigenous gas for deciding India’s participation. “As IPI supplies might begin only then (December 2013), its price needs to be compared to the prices of these (LNG from Gorgon Australia and RasGas Qatar) sources of gas,” it says.

Ministry officials said petroleum minister Murli Deora, in response to a letter from his Iranian counterpart, wrote on June 12 seeking an “early meeting” of the India-Iran Working Group on Oil and Gas to resolve the differences.

Discussions had fallen flat in 1993, but the project was revived in November 2004 by then petroleum minister Mani Shankar Aiyar at a meeting with then Pakistan prime minister Shukat Aziz.