"The offer from LUKoil was technically examined by ONGC and the area was considered to be prospective with excellent potential," the official, who sought anonymity, told Reuters.

ONGC has been offered 40 per cent participation in the project for which it would have to pay $51 million towards costs incurred in the past and signature bonus to LUKoil. "We will also have to pledge a work commitment of $70 million," the official said.

The two signed a pact last week to finalise the terms and conditions for participation before March 1999 -- when LUKoil plans to begin drilling at the site, he said.

"Since the investment will be around $120 million, which is beyond the approval limit allowed to the empowered committee (of the Indian government), the proposal will have to be approved by the cabinet," the officialsaid.

He said LUKoil had offered 8.0 per cent of its equity to ONGC. "The terms and conditions of the equity transfer will be finalised by end-February," he said.