They said the government had indicated it wants to restructure prices and may change a 1994 petroleum policy which kept gas prices relative to the weighted average of the C&F price per barrel of a basket of imported crude oil grades.

``Yes, they have given these overtures... The negotiations could delay the development of the new gas,'' said an official at one foreign exploration company.

He said producers were already finding it difficult to finance new projects, adding that negotiations over price cuts had added to the problem.``The ministry (of petroleum and natural resources) is exploring different techniques to the extent that exploration companies agree on a framework for a price cut,'' another oil company executive said.

The budget for the 1999-2000 fiscal year, which will be released on Saturday, could reveal the ministry'splans because it would show the funds available with the government for the oil and gas sector, he said.

Industry officials said problem could emerge in the middle Indus region where recent finds are estimated at up to 3 trillion cubic feet (85 billion cubic metres). They said some of the concession blocks in Bhit, Zamzama and Miano located in the provinces of Sindh and Baluchistan in Zone 111 could be developed in nine months to one year.

Foreign companies involved in the region include LASMO, Austria's OMV, Australia's BHP, Premier, Tullow unit Tullow Pakistan Development Ltd and Union Texas.

The foreign company official said the policy gives the government the first option to purchase gas from producers in Zone 111.

``It is an option not an obligation under the 1994 policy, but there is no other buyer,'' he said, adding the government wanted to cap prices at a certain level where a hike in oil prices does not trigger an increase, in the price it has to pay for gas.

``Legally, they have the option(of not buying and seeking price cuts) but it is against the spirit of the policy,'' he said. Another industry official, who asked not to be named, said the gas producers would now give a ``hard look at their money'' in view of the request to renegotiate agreements.

Pakistan's financial problems, which the government blames on sanctions imposed in the wake of its nuclear tests in May last year, and its fight with independent power producers over tariffs have already discouraged foreign investment, he said.