Muscat: Oman and Iran plan to complete the development of the Kish gas field in the Gulf by 2012 with the Gulf Arab state footing the bill of up to $12 billion, an Omani energy ministry official said.

"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," an oil and gas ministry project official, who declined to be named, told Reuters.

"The project will involve a 200-km 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 three billion cubic feet."

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

Iran's oil minister travelled 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 supercool gas so it can be exported by ship.

Facing US sanctions and pressure, it has increasingly turned towards Asia and elsewhere to develop its oil and gas sector.

The Islamic Republic's gas reserves were put at 27.80 trillion cubic metres at the end of 2007, compared to Oman's much more modest 690 billion cubic metres.

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.

Some of the Iranian gas would be used by Oman, it added.

The two countries are also developing another Gulf gas field, called Hengam in Iran and West Bukha in Oman.

Hengam is a joint field, holding around two trillion cubic feet of gas in the Strait of Hormuz.

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

"We plan to have this field supplying gas by 2011, subject to negotiations."

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 tonnes per year Oman LNG and Qalhat LNG plants.