Iraq has invited Indian Oil Corporation, the country's largest oil refiner, to set up refineries in the war-torn country, and also participate in other downstream projects, a government statement said.

Petroleum Minister Murli Deora, who is currently on a visit to Riyadh in Saudi Arabia to participate in the Second Ministerial Energy Round Table of Asian Oil Producing and Major Asian Oil Importing Countries, met Iraqi Oil Minister Hussain Al-Shahristani and discussed ONGC Videsh's participation in Iraq's upstream sector. OVL and Reliance Industries have evinced interest in entering Iraq's oil exploration sector.

OVL, Reliance and Algeria's Sonatrach were in talks with the Saddam Hussein regime before the US took over Iraq in 2000. The UN sanctions that came in after 2000 prevented further talks from talking place.

Iraq has proven oil reserves of 112 billion barrels, which makes it the world's second largest, behind Saudi Arabia.

Deora also met Iranian Oil Minister Seyed Kazem Vaziri Hamaneh and Pakistani Petroleum Minister Amanullah Khan Jadoon to discuss the 10-year old Iran-Pakistan-India gas pipeline project.

Deora was recently in Iran to discuss the pipeline project as well. The $7 billion pipeline has come under US scrutiny with the US asking both India and Pakistan not to go ahead with the pipeline as it claims Iran is making nuclear weapons.

Deora also discussed the liquefied natural gas import contract with the Iranian minister. In June 2005, India had signed a sale-purchase agreement with Tehran for import of 5 million tonne per annum of LNG by end 2009. The contract, signed between the National Iranian Gas Export Company and a consortium of GAIL, Indian Oil and Bharat Petroleum, was has not yet been approved by Iran's Supreme Economic Council.

Under the 2005 contract, India was to buy the LNG at $3.25 per million British thermal units.

Iran is now demanding more for the LNG after a sharp rise in global oil prices. The price of LNG is linked to crude oil prices, which rose to $75 a barrel in 2006.