Iran LNG Co, a subsidiary of state-run National Iranian Oil Company, has asked Oil and Natural Gas Corp (ONGC) and its partner Hinduja Group to pay the advance so that it can complete a USD-4.35 billion plant that will liquefy the natural gas produced from fields in the Persian Gulf, a source in know of the development said.

The demand for advance money came when ONGC-Hinduja were negotiating for a stake in the development of the Phase-12 of the giant South Pars field. South Pars Phase-12 is to feed gas to the LNG plant being built by Iran LNG at Tombak Port by 2011.

The source, however, said the demand is unlikely to be met as there was no dispensation at present under which advance money can be paid for purchase of oil or gas at a future date.

The joint venture is yet to formally say no to the proposal but will in due course convey the same, he said.

The joint venture of ONGC Videsh - the overseas arm of state-run ONGC, and Hinduja Group firm Ashok Leyland Project Services Ltd was formed to acquire rights for developing the South Azadegan oil field in Iran and South Pars Phase-12.

But the joint venture has already suffered a set back with Iran offering the 260,000 barrels per day South Azadegan oilfield to a Chinese firm.

After giving the South Azadegan oilfield to China, Iran has trimmed by one-third the promised 60 per cent stake to ONGC-Hinduja Group joint venture in the Phase-12 of the South Pars gas field, the source said.

China had won rights of the Azadegan oilfield, in which the Indian combine was previously offered 45 per cent interest, by offering multi-billion dollar soft loans.

The soft-loan approach for securing energy-assets is not high on Indian government’s agenda as it is also wary of its firm being banned for investing in sanction-hit Iran, he said.

With US technology not coming the Iranian way because of sanctions, the Iran LNG plant that will turn natural gas into liquid state will use technology from Statoil-Linde of Europe.

The two trains will produce almost 8.5 million tonnes per annum of LNG from gas piped in from the Phase 12 development of the giant South Pars gas field. The designated capacity is below the 10.5 million tonnes a year target cited in recent years by Iranian officials.

Construction on the Iran LNG plant, being built at Tombak Port, about 50 kilometers north of Assaluyeh in Bushehr province, started in 2007 and is 25 per cent complete. The plant will cost USD 4.35 billion and is expected to become operational in January 2011.

The client for the Iran LNG project is Iran LNG Company (ILG), a subsidiary of the National Iranian Gas Export Company, itself a subsidiary of National Iranian Oil Company.

The Indian joint venture is talking to Petropas, the firm that has the rights for developing South Pars Phase-12. Phase 12 is to produce 3 billion cubic feet per day of gas and 120,000 barrels per day of condensate, in addition to quantities of sulphur, liquid petroleum gas and other products.