India backs Russia in IPI gas pipeline

MUMBAI—India’s oil minister welcomed Russia’s interest in a proposed $7 billion scheme to pipe Iranian natural gas to South Asia, as it would improve security, but analysts doubted the merits of Moscow’s involvement.
“We believe that Russia’s participation is important for the safety and security of the pipeline,” Oil Minister Murli Deora told reporters on Friday. The plan to bring gas from Iran across Pakistan to India has been discussed for more than a decade but hostility between Islamabad and New Delhi and fears of attacks on the pipeline have delayed the project. Russian President Vladimir Putin has said in the past Moscow was interested in the project and news agencies quoted him in June as saying gas monopoly Gazprom was ready to help implement and finance the pipeline.
That would be the case “especially as a project like this can pay for itself”, Putin was quoted as saying. Deora said his Pakistani counterpart also welcomed the possibility of a Russian role, and he hoped Iran would also support it. But analysts saw little value in the proposal. “India and Pakistan have to resolve the security issue. I don’t see Russian participation altering or enhancing the situation at all,” said Vishvjeet Kanwarpal, chief executive at New Delhi-based Asia Consulting Group.
“A major stumbling block is that Iran wants to sell gas at the delivered price of LNG (liquified natural gas). Until this changes, there is a serious question on the pipeline’s future.” Iran, which has the world’s second-largest reserves of gas, said in August that India and Pakistan were offering only half the price Tehran was seeking. An international consultancy has been appointed to come up with a fair price. Deora declined comment on the nature of Russian involvement but a senior oil ministry official, who did not want to be identified, said Russia could help with finance.
India has also held talks to build gas pipelines from Myanmar and Turkmenistan but rising domestic output would make these projects less attractive, analysts say. Demand for natural gas in India is more than 150 million cubic metres per day, hugely outstripping supplies of 108 million cubic metres, which includes 20 million cubic metres of LNG. Reliance Industries plans to produce 80 million cubic metres of gas a day from 2008, doubling production. Russia, the world’s second-largest oil exporter after Saudi Arabia, and India are keen to strengthen energy cooperation.
India, which imports 70 percent of the oil it consumes, is encouraging the use of natural gas in factories and automobiles to reduce air pollution and control its rising oil import bill.