rediff.com: Reliance, Malaysia's Petronas likely to set up LNG plant in Iran

India's Reliance Petroleum and Malaysia's Petronas have signed an agreement with the National Iranian Oil Company or NIOC to set up a 7.5 million tonnes per year liquefied natural gas or LNG plant in Iran, Indian industry sources said on Thursday.

"Last week, Reliance signed a memorandum of understanding with NIOC for setting up a 7.5 million tonne LNG plant in Iran," an industry official told Reuters.

State-run oil and gas company Petronas had also signed the same MoU with NIOC, he said.

Petronas, Reliance and NIOC will each hold 25 per cent equity in the $3.5 billion project. "The fourth partner is yet to be decided," he said.

A Reliance spokesman declined to comment while Petronas and NIOC officials could not be immediately reached on Thursday.

The agreement has blocked a planned integrated gas project by Indian Oil Corporation and Oil and Natural Gas Corporation in Iran for LNG supplies to India, said an ONGC official, who did not want to be identified.

The project, jointly pursued by IOC and ONGC, included developing gas fields in Iran's South Pars field and setting up a liquefaction plant. "What is now left of the project is the upstream sector -- exploration and development of the blocks -- but this is not attractive," said the ONGC official, who is aware of the Reliance-Petronas-NIOC tie-up.

"We are still hopeful that they will give the remaining 25 per cent equity to us (IOC-ONGC combine)," he added.

The IOC-ONGC proposal was a 50:50 joint venture between the Indian and the Iranian firm, he said, adding that a draft of the shareholders agreement had recently been sent for NIOC's approval.

Oil explorer ONGC and refining and marketing firm IOC are equity promoters of India's Petronet LNG Ltd which plans to import LNG, regassify and sell natural gas in the country.

An oil company official said Petronas and Reliance have agreed to buy about 2.5 million tonnes of LNG each year from the project which will source gas for liquefaction from South Pars.

Petronas has an agreement to supply up to 2.6 million tonnes of LNG to Enron India's 740-megawatt Dabhol project, whose capacity is to be raised by another 1,624 mega-watt in 2001.

Reliance has government approval to set up an LNG import and regassification terminal at Jamnagar and Hazira in the western Gujarat state. Each would handle 5.0 million tonnes of LNG a year.

Reliance, which has a refinery and petrochemical complex at Jamnagar, is one of the bidders for setting up a 2,000 MW power project at Pipavav, which is also located in Gujarat.

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