A thaw in Indo-Pak relations has revived hopes of piping natural gas from Iran to energy-starved South Asia over land, a move project analysts say could help bind the nuclear-armed foes in a constructive relationship.

The Indian government prefers a more expensive sea pipeline to avoid the pipeline becoming a potential target for Pakistan. The two countries have fought three wars and came close to war once again last year.

But analysts say recent improved relations between the neighbours raises the chances of getting discussion of the $4 billion land-based pipeline back on the table.

"It is getting more realistic by the minute at this moment," Marika Vicziani, a professor at the Monash Asia Institute in Melbourne, told Reuters.

"The pipeline is a wonderful way to focus on something positive. I am cautiously optimistic," she said.

"Sri Lanka was far more intractable than even Kashmir," she added, referring to peace talks currently underway to end 20 years of civil war on the island.

Kashmir is disputed by India and Pakistan and has been a key issue in bilateral relations for decades.

India is already concerned about Pakistan's role in a proposed pipeline from Turkmenistan via Afghanistan and Pakistan.

"Such trans-national pipeline projects are very sensitive projects," Indian minister of state for oil, Santosh Kumar Gangwar, told Parliament this week.

"Besides the techno-economic feasibility, the geo-political situation and bilateral relationships have to be taken into account to take a decision in the right perspective," he said.

Energy shortage

Energy-hungry India, with a population of more than a billion people, has been striving for more independence in sourcing energy. It imports 70 per cent of its crude and produces less than half its daily requirements for gas.

India has signed a contract to buy liquefied natural gas from Qatar and is keen to import gas from Bangladesh and Myanmar.

The land route for a gas pipeline from Iran has been under discussion for a decade, but has been on hold because of India's fears over the security of the pipeline.

"We will prefer the sea route from Iran," petroleum secretary B K Chaturvedi told Reuters.

Analysts say India's worries could be eased somewhat if international companies were involved in a land-based pipeline and if heavy penalties were imposed for any supply disruption.

"The pipeline would provide a very credible force for the establishment of peace between the two countries and should not wait for the Kashmir issue being settled," said R K Pachauri, who heads a UN body on climate change and The Energy Research Institute in New Delhi.

Indian officials say domestic demand is big enough to justify pipelines from both Iran and Bangladesh on economic grounds as well as importing LNG, despite a major gas discovery in southeastern India last year.

"International pipelines are not a threat to LNG projects. There is a huge shortage and a lot of latent demand which will come up once gas is available," an oil ministry official said.