Oman and Iran plan to complete the development of the Kish gas field in the Persian Gulf by 2012, as Iran increasingly seeks to develop its oil & gas sector.

Reports from Reuters news agency and Tehran Times suggest the two countries will proceed with the development with the sultanate footing the bill of up to $12bn, an Omani energy ministry official said.

Iran and Oman signed a deal in April to jointly develop Iran’s Kish gas field in the Persian Gulf at an estimated cost of between $7bn and $12bn, but did not give a timeline for the project at the time.

This latest announcement provides a dedicated time-scale for the project and signals the latest step forward. An un-named official is believed to have told Reuters, “Oman is going to wholly fund the Kish gas field and we expect to sign an agreement at the end of 2008 so the plant can start producing gas for Oman by 2012.”

“The project will involve a 200km (124-mile) pipeline, mostly underwater, to Musandam and Sohar. Phase one of this project will transport gas to Oman at a rate of one billion cubic feet per day and then rising to 3 billion cubic feet.”

Iran’s oil minister traveled to Muscat earlier this month to discuss the plans to export Iranian gas to Oman, from where it could be exported using an Omani liquefied natural gas plant.

Iran has the world’s second biggest gas reserves but has been slow to develop gas exports and has no LNG facilities, which super-cool gas so it can be exported by ship.

Iran’s ISNA news agency said that the gas heading to the Omani LNG facility will be used by the National Iranian Oil Company, a state firm which oversees Iran’s hydrocarbons industry, in its international markets and sales.

“Oman is also going to develop the Bukha gas field at a cost of $200m with a 100km pipeline transporting Iranian gas to Sohar and then eventually to Sur,” the official said.

Sohar is home to major projects such as a 120,000 barrel per day refinery, aluminium smelter, methanol and fertiliser plants. Oman also needs to supply gas to Sur, to the 10 million tons per year Oman LNG and Qalhat LNG plants.