A formal agreement to this effect is expected to be reached soon between Petronet and RPG Dholpur Power Company, highly-placed Petronet sources said.

However, RPG officials said discussions were still on for evaluation of the various options available and an agreement will be reached after consultations with the current fuel supplier.

As of now, the Dholpur power project is based on liquid fuel and has a fuel supply agreement (FSA) in place with the Indian Oil Corporation (IOC) for supply of 0.8 million tonnes of naphtha per annum.

It is possible for the project to switch to LNG without any major change in design or construction, Petronet sources said. LNG is much cheaper, more efficient and cleaner a fuel than naphtha, they added.

They said Petronet will provide LNG to the project from its five million tonnes perannum LNG import terminal at Dahej in Gujarat. The supply agreement would be for a 20-year period, they added.

The natural gas for the Dholpur project will be supplied from the Gas Authority of India's (Gail) Hazira-Bijapur-Jagdishpur (HBJ) gas pipeline, Petronet sources said.

The newly-laid Bijapur-Dadri arm of the HBJ runs close to the RPG project making the delivery of gas possible with minimum additional infrastructure, they added.

Petronet has made preliminary commitments for the supply of more than 5 million tonnes of LNG per annum from the Dahej terminal to various industrial customers in the region, the sources said.

Petronet LNG, a joint venture company of four national oil companies -- Indian Oil Corporation, Gas Authority of India Ltd, Oil & Natural Gas Corporation and Bharat Petroleum, has plans to set up two LNG import terminals, at Dahej in Gujarat and Kochi in Kerala.

Petronet had selected the RasGas-Mobil combine as its LNG supplier to terminals at Dahej and Kochi. The multinationalconsortium will supply a total of 7.5 million tonnes of LNG per annum, the sources said.

Out of the 7.5 million tonnes, five million tonnes will be supplied to the Dahej terminal and the remaining 2.5 million tonnes to the Kochi terminal.

RasGas-Mobil has also evinced interest in picking up equity in Petronet LNG. The Gujarat government is also likely to acquire a stake in the project, they said.