Iran offers cheap natural gas to Chabahar fertilizer project

22 April 2014 07:28  [Source: ICIS news]

KOLKATA (ICIS)--Iran has offered natural gas supplies at $3 per million metric British thermal unit (mmBtu) to the Chabahar urea project proposed by a consortium of Indian companies, an official at India’s Department of Fertilizer said on Tuesday.

The consortium comprises Rashtriya Chemicals and Fertilizers Limited (RCFL), Gujarat State Fertilizer and Chemicals Limited (GSFC),  Gujarat Narmada Valley Fertilizer and Chemicals Limited (GNFC) and one company to be designated by Iran that will have a minority stake in the project, the official said.

Iran has offered assured and uninterrupted supplies of natural gas at the fixed price of $3/mmBtu to the fertilizer project, which would cost $1.2bn to build, the official said.

With the price offer for feedstock natural gas now on the table, the Indian fertilizer companies are expected to firm up the plant parameters including capacity, the official said.

Supply of feedstock natural gas to the project at the fixed price will be provided over a period to be mutually agreed between the project proponents and the Iranian government.  

Full urea output from the project at the Iraninan port town of Chabahar will be shipped out to India, the official said.

The urea project was conceived by the Indian consortium as Iran sought investments for Chabahar in November last year.

The Iranian offer for natural gas supply at a fixed price has come at an opportune time, when domestic natural gas pricing had cast uncertainties over investments in new urea projects, the Indian government official said.

The Indian government had already approved the doubling of natural gas price from $4.2 per mmBtu to $8.3 per mmBtu from 1 April, but the implementation was suspended to 17 May,  after the national elections.

A $1 per mmBtu increase in cost of natural gas translates to $22/tonne increase in urea’s cost of production, according to estimates from the Fertilizer Association of India (FAI).

India produces 18m tonnes/year of urea using natural gas a feedstock, with gas accounting for 80% of urea’s production cost.


Author: Ajoy K Das



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