Top government sources revealed that the National Iranian Oil Company (NIOC) has invited Gas Authority (Gail) for detailed discussions over its participation in the Iranian LNG project. Besides the equity alliance, Gail is also looking at forging an marketing tie up with NIOC to sell LNG in the Indian market.

Gail officials confirmed the move and said that the extent of equity it would pick in the project has not been decided as yet and will be done following discussions with the NIOC officials.On the marketing tie-up, Gail sources confirmed that this was the key area of interest but said that no formal decision has been taken as yet in this regard.

Sources said that a team from Gail visited Tehran in April this year for discussions on the LNG project besides the deep water pipeline.In order to develop this LNG project, NIOC has already signed a preliminary agreement with Reliance Petroleum and the Malaysian oil major, Petronas. The public sector oil navaratna, Indian Oil Corporation (IOC) has also evinced interest in picking up equity in the project.

It is significant to note here that LNG from this project would be exported to India. Iran has the world's second largest gas reserves but has no exports. NIOC has therefore decided to set up this 7.5 million tonnes per year LNG plant in Iran in partnership with Indian and other foreign companies for exports to India.

Sources said that Petronas, Reliance and NIOC will hold 25 per cent equity each, in the $ 3.5 billion project. The fourth partner is yet to be decided.The gas for the liquefaction plant will be sourced from blocks in Iran's South Pars field. Sources said that results of tenders for the fourth and fifth development phases of South Pars are expected to be announced next month.

TotalFina, Elf of France besides Italy's ENI are being considered to be the leading contenders. Sources said Petronas and Reliance have given assurances to NIOC of buying some quantity to the tune of about 2.5 million tonnes each. It is learnt that Petronas has a preliminary agreement to supply up to 2.6 million tonnes of LNG to Enron India's 740 mw Dabhol power project, whose capacity is to be raised by another 1,624 mw in 2001.Reliance already has the cabinet approval to set up a LNG import and regasification terminal at Jamnagar and Hazira in Gujarat. Each would handle 5.0 million tonnes of LNG a year.

Reliance, with a refinery and petrochemical complex at Jamnagar, is amongst the nine bidders for setting up a 2,000 mw power project at Pipavav, in Gujarat. In contrast to the Indo-Iran gas pipeline project, the LNG project is seen as a politically more viable alternative. The Iranian and Indian foreign ministers agreed in Tehran last week to conduct a feasibility study on a 2,500km land pipeline that would take Iranian gas through Pakistan to India. Pakistan has already agreed to the project in principle but India is seeking guarantees before committing itself.