The American utility, KeySpan, is proposing to build a £140 million (€177.63 million) gas pipeline between Northern Ireland and the Republic.

The company, which is listed on the New York Stock Exchange, has held discussions with Bord Gais, the Northern Secretary, Dr Mo Mowlam, and the Minister for Public Enterprise, Ms O'Rourke, in an attempt to gain their support.

Ms O'Rourke and Dr Mowlam held discussions about the issue last week but have not officially put their support behind any proposal.

However, it is understood the British government is strongly in favour of KeySpan's proposal and has communicated this to the Government.

A major study commissioned by the Department of Public Enterprise on the State's future gas requirements is currently being carried out. This study will assess potential options, including proposals for a North-South pipeline.

Mr James A. Rooney, a director of KeySpan, said the company was prepared to build the pipeline on its own or as part of a joint venture with Bord Gais.

KeySpan has a stake in the gas pipeline between Scotland and Northern Ireland and says the investment in a pipeline here could be followed by the construction of its own generating plants.

KeySpan is the second American company to unveil a gas pipeline proposal. Last month Canatxx, controlled by the Texan businessman, Mr Denis Volter, announced plans to build an inter-connector between the UK and the Republic, at an estimated cost of £300 million.

Subsequently, the company refused to disclose the financial details behind its project or the route the pipeline would follow.

There is need for a new gas pipeline as the existing one which runs between Scotland and north Co Dublin is about to reach capacity. In addition, the other major source of gas at Kinsale is expected to run dry in about 2005.

Bord Gais is currently assessing potential future sources of gas. One option is to build a pipeline beside the current one.

Bord Gais and the Government will now have to decide whether this is a better option than KeySpan's. A third option is to take gas from the Corrib discovery off the coast of Achill. This is currently undergoing final testing by Enterprise Oil.

A spokesman for Bord Gais said that meetings had been held with KeySpan, but no decision had been made on its proposal.

KeySpan has set aside a $2 billion budget for investment outside its core market in the United States.

It is close to submitting a proposal to the Northern Ireland Economy Minister, Mr Adam Ingram, to build a pipeline from Belfast to Derry which would link up with the Coolkeragh power station, in which ESB has a stake. This pipeline might also connect with the one for Dublin, Mr Rooney said in Dublin yesterday.