Indian state-run gas transmission and marketing giant GAIL Ltd and Iran's NPC International Ltd will set up a $1.5 billion gas cracker plant in Iran, GAIL told the Mumbai Stock Exchange on Thursday. The two companies will set up a 1-million-tonne-per-annum ethylene cracker in South Pars in Iran to make plastics such as low density polyethylene, linear low density polyethylene, high density polyethylene and poly vinyl chloride. GAIL and NPC will jointly own the new company, which will receive low-cost supply from the giant South Pars Gas Field.

A feasibility study is underway and likely to be completed in two months. GAIL will provide the venture with senior management staff and operational and technical expertise, while NPC will get statutory approvals and governmental clearances.

Iran is the second-largest producer of natural gas and holds 15 percent of the world's reserves. It also is emerging as a leading producer of petrochemicals.

Major Indian energy companies such as GAIL are diversifying into the petrochemical sector, given the robust 14-15 percent growth the domestic industry is seeing.

Separately, GAIL has signed a memorandum of understanding with SPECTRA International Ltd of Bangladesh to explore opportunities in developing infrastructure for compressed natural gas and the gas retail market in that country. GAIL has also signed a memorandum of co-operation with Ergo Exergy Technologies Inc of Canada for coal gassification.

Copyright Reuters, 2005