The agreement was signed between the NNPC, representing the Nigerian government, the Nigerian Agip Oil Company, ChevronTexaco and ConocoPhillips oil companies.

Yesterday's agreement will lead to the award of contract to Front End Engineering on the Brass LNG project, scheduled to cost the partners around three billion dollars. First shipment of LNG cargo from the plant is expected to be in the last quarter of 2008.

Nigeria's first LNG plant came on stream in October 1999, on Finima Island, Bonny, Rivers State, and is jointly owned by Shell, Agip and Elf Petroleum.

Although often heralded for its massive oil reserves Nigeria has untapped gas reserves estimated to be around 160 trillion cubic feet. Currently over 70% of the country's oilfields are flared, resulting in potential revenue earning gas going up in smoke, money that the economically strapped country can little afford to lose.

The plant is expected to operate on two trains, with a production capacity for 10 million metric tonnes of LNG per year, targeted at the increasing energy market in the United States.

Nigeria's move is the second in the last fortnight from an OPEC member into the burgeoning LNG market after Qatar announced plans to exploit its reserves of around 900 trillion cubic feet.