The possibility of finding large reserves of natural gas in the Krishna-Godavari basin and the deep waters of the Andamans has cast its shadow on the proposed Indo-Iran gas pipeline project.

While the government maintains that the project is on and a joint working committee, set up in August 2000, is looking into its various aspects,  knowledgeable sources insist that the project may eventually be shelved.

The sources said the country's liquefied natural gas import policy was being reviewed in the light of the new estimates about gas reserves.

And even if India chooses to import LNG from Iran,  it is unlikely to invest in a pipeline. This is because some LNG import projects in the country are in a fairly advanced stage of implementation.

"It will be foolhardy to make huge investments in laying a pipeline for the gas that India may not need in the future," the sources said.

They said the latest demand-supply projections showed that the country would have sufficient gas supplies to match the expected 135-140 million standard cubic metres of gas per day (mmscmd) demand in the terminal year (2006-07) of the Tenth Five Year Plan. If more discoveries are made, the country may have a surplus of gas.

Under these circumstances, there may not be any need to import LNG. Thus, if India commits itself to 25-50 years of gas imports through a pipeline, it will not be able to opt out because of certain take-or-pay clauses in the contract.

India's aversion to the idea of piped gas from Iran was obvious at the last meeting of the joint committee in Tehran. The Indian side argued that it could import LNG through means other than a pipeline.

This will not only help the country match gas imports with domestic requirements but also prevent the need for making an additional investment.

However, the Iranians said that LNG could be a complementary mode of transfer of gas and not a competing option vis-a-vis the pipeline.

But Indians were of the view that LNG could be a principal option for transfer of gas from Iran to India and not a complementary option.