Singapore: Iran plans to begin a $1.2 billion project to double the capacity of its 110,000 barrel per day Tabriz refinery in the second half of next year, a source from the National Iranian Oil Company said yesterday.

"We are in the process of putting out tenders and confirming plans, and we hope to see work actually start in about 6 to 8 months," the source said. The project should be completed three to four years after work begins, the source added.

Iran, despite being the world's fourth-largest crude oil producer, is its second-largest importer of gasoline due to a lack of refining capacity. It has embarked on a series of measures to limit fuel demand and lift output in order to reduce its import bill and its reliance on overseas markets.

The Tabriz expansion should allow the refinery to double gasoline production to 50,000 bpd, the source said.

Iranian security officials fear their country's dependence on imported gasoline for about 40 percent of the 440,000 bpd it consumes could leave it highly vulnerable to any UN sanctions imposed over its disputed atomic programme.

Consumption levels have been boosted by Tehran's policy of heavily subsidising the motor fuel, which analysts say also encourages smuggling to Iran's neighbours. Gasoline in Iran sells for about 9 cents a litre.

Oil traders send a tanker of gasoline to Iranian docks every two days in peak periods and so closely watch Iran's refinery upgrade plans as these could affect import demand.