Oman LNG is seeking a $1.3 billion refinancing package with a $500 million bond component and expects to secure it by early next year at latest, an oil ministry official said.

"We expect to receive a proposal on Friday for the commercial tranche with an in-built $500 million for the capital market. We are looking at a maximum of 10 underwriters for the $1.3 billion," Ali Battashi, director general of planning and project evaluation at the oil ministry, told Reuters.

"We are keeping aside $500 million at any time when the window is open to the capital market..U.S. bonds," he said in an interview on the sidelines of a privatisation conference in Abu Dhabi, adding that market sentiment had "dried up" following the September 11 attacks. Battashi said a financial close was expected by year end or by early 2002 and that he was confident Oman LNG would get ammortisation of 16.5 years.

The government owns 51 per cent in Oman LNG while Royal Dutch/Shell Group holds 30 per cent. Other stake holders are TotalFinaElf, Korea LNG Co, Partex, Mitsui, Mitsubishi Corp and Itochu Corp.

Battashi said it was the right time to go out and refinance because the project was generating "robust" cash flows and had been completed "significantly" below budget. He said the rationale behind going into the markets was that Oman LNG had been able two receive preliminary ratings from Moody and S&P of A- and A3 which he said was the strongest rating outside the OECD.

"It is the first time in history that a project in the Middle East achieved this status," he said. Oman LNG, which started its operations in April 2000, reported a nominal loss of $3.2 million last year, but company officials have said they expect healthy profits in 2001.

Oman LNG has already secured long-term contracts with Japan, South Korea and India ranging from 20 to 25 years of supply. Battashi said Oman LNG's first delivery of liquefied natural gas (LNG) to India-based Dabhol Power Co would be delayed until next February 2002 but that there were no contractual problems.

Dabhol, 65 per cent owned by Enron Corp of the U.S., has been locked in a payments battle with India's Maharashtra State Electricity Board. The dispute has halted work on the second phase of the $2.9 billion Dabhol power plant project.

Oman LNG in 1998 signed a 20-year agreement to sell 1.6 million metric tonnes per year of LNG to Dabhol with the first shipment due in November. "The Dabhol SPA is still intact. There are exit clauses for both Dhabo and the government but we are very hopeful that Dhabol will take LNG from Oman," Battashi said.

He said that Oman LNG's supply contract with the Omani government could be extended beyond 2024 after two new gas fields - Khazan and Kawthar -were recently discovered which could, according to initial indications, increase the Gulf Arab states' gas reserves by around 25 per cent from the current 30 trillion cubic feet.

Battashi said Oman LNG would press ahead with its expansion plans and focus on markets in the Far East. He said the company was "conscious of net back numbers for Europe and the Atlantic Basin".

The company is planning to build a third train to raise the Gulf Arab state's LNG output to 9.9 million tonnes a year from the current 6.6 million tonnes a year. Oman Oil and Gas Minister Mohammad bin Hamad Al-Rumhi has said the Gulf state was still evaluating the proposal to build the third train at a cost of about $980 million.