Mr. Krishna knows the Iranian foreign minister Mr. M Mottaki quite well since the Iranian leader had his education in Bangalore and he speaks fluent Kannada, the mother tongue of Mr. Krishna. Mr. Mottaki is constantly in touch with Mr. Krishna and the sources say that Iran has got assurance from the Indian Government that India will go ahead with its planned measures for improvement of economic relations with Iran including talks on the setting up of the IPI pipeline, without caring for the US position. Apart from the G-15 foreign ministers meeting, India has proposed technical level talks in Teheran in this month of May itself between the three countries to have detailed discussions on the concerns expressed earlier including pricing and security of the pipelines.

Indian officials point out that Teheran has been insisting that the ownership of gas would be transferred at Iran-Pakistan border while New Delhi wants it to be Pakistan-India border thereby making Iran explicitly responsible for safe delivery of the gas. India wants in built safeguards in the contract to ensure safe delivery of gas at India-Pakistan border. While the 1100 km pipeline from South Pars gas fields in the Persian Gulf to Iran-Pakistan border would be laid by an Iranian firm, India wants to take stake in the 1035 km pipeline section in Pakistan. India feels that its participation in execution of pipeline in Pakistan would make the project more bankable, reduce the financing cost, ensure timely execution as also transparent and efficient management of the operations. Islamabad has so far not agreed to this proposal and it will need political intervention at the top to decide the issue in India's favour.

As regards pricing, India is not happy at Iran's hiking of prices charged from India. Earlier India accepted the price of US$ 4.93 per mBtu at US$ 60 a barrel crude oil prices but in 2009, Iran revised the price again and according to the new pricing formula, the fuel will cost India US$ 8.3 at US460 per barrel oil price at Iran-Pakistan border. Added to this would be a minimum of US$ 1.1 to 1.2 per mBtu towards transportation cost and transit fee that India would have to pay for transporting the gas through Pakistan. There is another hitch. Iran is not willing to commit to a supply or pay regime wherein it would have been accountable for non delivery of gas at Indian border. It however wants India to commit to a strict take or pay clause wherein India would have to pay even if it does not take deliveries.

Officials feel that at the next round of trilateral talks in Teheran, Iran and India will make all efforts to come at an understanding on the pricing issue since there has been an improvement in political ties between India and Iran and the Indian petroleum minister Murli Deora announced at Cancun at the oil ministers summit that India, Iran and Pakistan will take up the issue constructing the joint gas pipeline of 2700 km and its annual capacity will be around 150 million cubic metres of gas and the discussions will be held as business project, nothing to do with any political issue.

Meanwhile, Indian petroleum ministry officials are aggrieved that in the discussions as a follow up of Russian Prime Minister Vladimir Putin's visit to New Delhi in December 2009, there has been no advance movement on the issue of increased participation by the ONGC Videsh Ltd in the new areas of Sakhalin islands. As of now, OVL is active in oil and gas exploration and production in Sakhalin 1 which is a large oil and gas field in far east offshore in Russia spread over an area of approximately 1,146 sq metre. OVL acquired stake in this field in July 2001 and with the start of exports of Sakhalin 1 crude oil from September 2006, the project started to generate a positive cash flow to OVL.

During 2008-09, OVL's share of production was 1853 MMT of oil and0.372 BCM of gas as compared to 2234 MMT of oil and 0.345 BCM of gas during 2007-08. The OVL officials are very optimistic about the Sakhalin oil fields and they have requested the Government at the highest level to take up their proposal for oil and gas exploration and production in Sakhalin 3, Vankor in East Siberia and Terbs and Titiv oilfields in East Siberia. Out of these new areas sought by the OVL, the topmost priority is for Sakhalin 3.

OVL sources say that so far there has been no positive response to the OVL plea to consider Sakhalin 3 and instead the Russian side is pressing for the acceptance of stake in gas fields in the Arctic peninsula of Yamal. This has already been rejected by the OVL since any work in Yamal will require huge investments and these will not be economically viable for the OVL. Yamal areas are gas rich and these need conversion into LNG and have to be shipped to the Pacific which will be quite costly. The point which the OVL is making is that India needs huge amount of crude oil from outside and the objective of the OVL explorations outside is to bring crude oil to India from these overseas destinations to the extent possible and it is economically viable. LNG from Yamal can not reach India and ONGC is more interested in oilfields.

Indian Government in fact wants that OVL should form a 49:51 joint venture with either Rosneft of Gazprom to work jointly in other oil fields in Russia. Further, this JV can be made use of to bid for oil and gas exploration in other countries including Africa and Latin America. India is also interested now to join hands with Rosneft for oil and gas exploration and development of fields in East Siberia. For instance, OVL is seriously interested in joint bidding for Trebs and Titov oilfields.

While, the ONGC has a feeling that the Russian authorities are dealing the issue of new areas from the standpoint of pure business operations, they want the Indian Government to take it up at a political level for arriving at a composite understanding on oil and gas exploration, especially including new areas of Sakhalin islands. India is also not getting positive response to its longstanding proposal for having a stake of 10 to 20 per cent for OVL in giant Sakhalin 2 oil and gas field in far east Russia. What the sources say that Russian government at the highest level has to work for an understanding on oil and gas collaboration which must include some new areas of Sakhalin 2 or 3. (IPA Service)