The BG and Agip project is known as National Iranian Oil Company (NIOC) LNG. BG signed up for the scheme late last year and Agip joined it in March. However, the two companies have not yet been officially informed of each other's participation in the scheme, precluding discussions on technical and marketing co-operation. Each company is believed to be pursuing an equity stake of roughly 25 per cent and a product stake of about 50 per cent. NIOC will hold 50 per cent of the equity but will not take any of the product.

Like the other three envisaged projects, the plant will consist of two trains, each with capacity of between 4.5 million-5 million tonnes a year (t/y). Agip is understood to be pursuing upstream work linked to the project in the form of a buyback contract for South Pars phase 11, which is likely to provide the feedstock for the plant. BG is willing to concentrate solely on the downstream and marketing elements.

BG will market the LNG through its existing sales network in India, where it already has an LNG import terminal, and in southern Europe, where it is building one. Agip will sell its share of the LNG in Europe.

The agreements signed with NIGEC are subject to the companies being confident of their markets and technology. The technology issue is a potent one, because the only existing commercial LNG plants use US technology.

The equity and marketing agreements are scheduled to take place in parallel, with both being concluded by the end of the Iranian year. An engineering, procurement and construction (EPC) contract is also planned to be let by the same date. Invitations for prequalification have already been issued and an invitation to bid is to be issued in May. Bids will be submitted by the end of 2003.

Although NIGEC is the only client to be listed on the tender documents, it is to stipulate that the eventual client will be a new project company composed of NIGEC and its foreign partners. Contractors have been asked to bring financing to the deal, but could be put off by the lack of a shareholders agreement. Project sources say there is a possibility other investors will become involved in the project on a purely equity basis.

NIOC LNG is one of four under study. Pars LNG is being pursued by France's TotalFinaElf and Malaysia's Petronas, Persian LNG by the Royal Dutch/ShellGroupand Spain's Repsol YPFand Iran LNG by the UK's BPand India's Reliance. The NIOC LNG project was originally tabled as a purely NIOC scheme, but the prohibitive cost of developing the project - roughly $1,500 million-2,000 million - coupled with the company's lack of a gas marketing network have led it to bring in foreign partners.

Apart from BG, every other company is seeking an upstream connection with a South Pars phase. New proposals from TotalFinaElf, Shell, Eni, Petronas and Norway's Statoilwere opened in late March. Progress on the LNG projects is contingent on a decision whether to link the up and downstream elements of the development. That decision must be made by Pars Oil & Gas Company, the NIOC subsidiary responsible for developing South Pars. Oil companies say a decision must be reached in the summer if the LNG projects are not to become seriously delayed.

NIOC has set aside phases 11-14 for gas export projects, including at least two LNG plants and one gas-to-liquids (GTL) scheme. Industry analysts say the market cannot support more than two LNG projects in the near term, suggesting the four projects under discussion will be consolidated towards the end of the year.