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Last Updated: Friday, 4 August 2006, 15:01 GMT 16:01 UK
Experts to set pipeline gas price
The pipeline would carry natural gas from Iran to India
India, Pakistan and Iran have agreed to appoint consultants in a bid to solve the issue of pricing over a proposed gas pipeline.

The project would carry natural gas more than 2,500 kms (1,562 miles) from Iran to India. Work could begin as early as next year.

But India and Pakistan cannot agree with Iran on the price of the gas.

Now the countries have agreed to appoint independent consultants who will advise on a pricing formula.

Iran wants to the price of the gas to be fixed to international market prices while India and Pakistan want a fixed price. The dispute has held up the $7bn project, which was first mooted a decade ago.

Further talks planned

The consultants, who have not yet been chosen, are expected to deliver a pricing formula within the next four or five weeks.

The three countries will then resume talks, based on the formula.

But it is not clear if the consultants' report will be binding on all three parties and it may be that one or more of them may yet back out of the deal.

India, Iran and Pakistan - all three - need to be flexible
M S Srinivasan
India's Petroleum Secretary

The Indian Petroleum Secretary, M S Srinivasan, told the BBC there was still quite a gap between the two sides: "The difference could be about 60% or so over what we are considering reasonable. India, Iran and Pakistan - all three - need to be flexible. Resilience is what is required, not rigidity."

But all sides remain bullish, with Iran claiming it can sell its gas elsewhere and India and Pakistan both claiming they have alternative suppliers in Qatar and Turkmenistan.

If the pipeline does go ahead India could buy up to 60 million cubic metres a day and Pakistan 30 million.

Both countries' energy demands are expected to double within the next 15 years.

Benefits to Pakistan

The pipeline would also bring financial benefits to Pakistan, earning the country millions of dollars in transit fees.

In May talks between the three nations failed due to disagreement on the price of the gas.

If the pricing issue can be resolved work could begin by the end of next year and the pipeline could be up and running by 2011.

The US had earlier opposed the project because of the financial and strategic benefits it would bring to Iran.

But during a visit to Pakistan in March this year, President George Bush indicated the US had dropped its staunch opposition to the pipeline.

Mr Bush said he understood the need for natural gas in the region and the US argument with Iran was over nuclear weapons.

Iran is believed to have the world's second largest reserves of natural gas after Russia.

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