Gholam-Hossein Nozari, who became permanent Oil Minister on 14 November, says there is sufficient scope for the deal to be extended to 2 billion cf/d by 2011.

“We have ample gas to supply the market, including Bahrain, and we will cement those talks further when we discuss pricing next year,” he says.

Iran's President Mahmoud Ahmadinejad signed a memorandum of understanding for the gas supply agreement on 17 November, during a state visit to Bahrain.

“We need to get the first stage of this contract set and then we can look to build up to 2 billion cf/d if the demand is there,” says Nozari.

An executive at the National Iranian Gas Export Company (NIGEC) says the contract is likely to run for 25 years.

“Bahrain has a long-term need for reliable imports of gas and the initial agreement is designed to provide security of supply for both sides,” he says.

Bahrain's Oil & Gas Minister Abdulhussain bin Ali Mirza says he is confident the deal will proceed, although the details of pricing and pipeline construction need to be discussed next year.

"We have a series of negotiations planned for next year both in Bahrain and Iran where, we will go and agree the detail,” he says.

Technical committees will examine several options, including Manama investing in an Iranian gas field and then importing gas, or buying gas produced through Iran 's own national investments.

Bahrain, one of the first countries in the Gulf to discover hydrocarbons, is also one of the first to suffer from dwindling supplies. It is the only GCC state to import oil, while also being stretched in terms of securing gas supplies.

With gas feedstock for local power generation increasingly limited, the country has to look abroad to expand capacity.

Bahrain produces about 1,000 million cubic feet a day (cf/d) of gas but is expected to need up to 2,500 million cf/d within the next decade.