The economics of the Teheran gas pipeline – India

The proposal to import natural gas from Iran seems in theory, to be a good idea. It will no doubt augment our energy resources in the hydrocarbon sector. There are, however, a few pitfalls against which we should guard ourselves if we are not to end up losers in the bargain The political ramifications of the proposal, including the U S opposition, are well discussed in the newspapers and magazines. In this paper I am discussing some of the major economic issues relating to the project.

The gas purchase contract will be a long term one stretching over 25 years, involving payment of over $30 billion at yesterday’s prices. It is difficult to foresee what the global prices will be over such a long period. It is, however, clear that prices of oil will not fall below 50 dollars a barrel.

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