While BP-Amoco will hold 50 per cent of the equity, IOC and Gail will take up 24 per cent each. The balance will be allocated to the Dehradun-based Indian Institute of Petroleum.

As per the plans, BP-Amoco will work on a field producing natural gas either in Qatar or Iran. A plant is proposed to be set up which will convert this gas into the liquid form, dimethyl ether (DME), and transport it via tankers to India. From here, pipelines have been planned to link those power plants which would require DME as feedstock. "BP-Amoco can comfortably get access to producing fields either in Iran or Qatar by virtue of which it will be the single-largest stakeholder. IOC and Gail will step in later to lay the pipelines within India," sources told The Financial Express.

Current estimates indicate that Rs 1,000 crore will be needed as investment for operations in the gas field and a little more, possibly Rs 1,500 crore, for the plant that will convert the gas into DME. Sources say that the balance will go towards construction of the pipelines and procuring tankers.

The techno-feasibility report is presently underway and will take a good five years before the project is actually implemented. "It involves a lot of hard work and careful planning. The promoters will also have to ensure that no glitches occur along the way," experts say. DME has been touted as the ideal fuel for power plants and will be affordable once the pipeline network is in place.

The project is equally significant as it will mark the first serious foray into India by BP-Amoco since their merger a year ago. It will also bring together the combined strengths of IOC and Gail in the fields of pipelines and natural gas marketing.

IOC is also toying with the idea of offering GAIL equity in select refineries and pipelines. The idea is merely at the formative stage and talks in this direction are yet to take off between the two companies.

"Ever since IOC bought 5 per cent of the government's equity in GAIL, little progress has been made in identifying areas of mutual interest," sources said. In fact, stories doing the rounds in New Delhi suggest that GAIL is still "very uncomfortable" about working with IOC though this could not be confirmed from company officials.

The biggest bottleneck in a easy rapport lies in the fact that there are practically no synergies between the two PSUs, unlike GAIL and the Oil and Natural Gas Corporation which have common interests in natural gas. However, IOC has identified LNG (liquefied natural gas) as a vital area of operations in the future and could team up with GAIL here.

In return, the Fortune 500 company believes that it makes sense to offer something in return from its key strengths which are primarily refining and pipelines.

GAIL has just begun work on the mega Jamnagar-Loni gas pipeline and the IOC top brass is now of the view that it could take a stake here as it has tap off points (TOPs) route. The IOC-GAIL rapport, sources say, has just not taken off on the expected lines. The two PSUs were to have begun a household gas supply network in Agra through a joint venture but this idea has virtually been buried. On the contrary, IOC has made relatively quick progress with ONGC in vital plans like refining, power and consultancy services. Even during the time the cross-holding option was mooted by the government, it was initially between IOC-ONGC and GAIL-ONGC. IOC, however, pressed its claim for buying out 5 per cent in GAIL for Rs 700 crore though the latter exercised its option only for ONGC where it bought 2.5 per cent of the Centre's stake.