Senior representatives from Questar, the US natural gas giant, are expected to hold further discussions in Belfast today about its joint venture proposal with Bord Gβis ╔ireann to build a new multimillion pound pipeline in Northern Ireland, amid rumours that it is on the verge of abandoning the project.

Questar and Bord Gβis have applied to the Office of Energy Regulation in the North for a licence to build a gas pipeline from Belfast to Derry that would supply gas for a new power station planned at Coolkeeragh on the outskirts of Derry. Mr Douglas McIldoon, the industry regulator in Northern Ireland, is currently reviewing the application and his decision is expected shortly.

Senior sources from Questar said last night that the company was still "actively seeking a licence" but other industry insiders in Northern Ireland believe that the American group is frustrated by the lengthy application process.Questar first applied to develop a gas pipeline in the North more than two years ago. It then decided to team up with Bord Gβis and reapplied for a licence more than 12 months ago.

Some industry observers believe Questar is now on the verge of walking away from the project. Senior sources at the company refused to comment on this speculation. "We are hopeful that the licence details will be made public very soon and we will be in a position to comment on our position when that happens," a US spokesman for the group said last night.

The proposed gas pipeline is a crucial component of ESB International's plans to develop a new £150 million sterling (€245 million) power station in Derry, with its joint venture partner, Coolkeeragh. The new gas-fired power station on the outskirts of Derry will replace the existing facility at Coolkeeragh and was scheduled to be in operation by early 2004.

The Northern Ireland Executive and the Government have already agreed to provide substantial financial support to the proposed gas pipeline, but Questar has also committed up to £100 million sterling to the project. Although the Government has earmarked £10 million for the new pipeline and the Northern Ireland Assembly will also provide substantial finance towards the £38 million sterling grants package, Questar's input is seen as central to the financial viability of the project.

Both ESB International and Coolkeeragh said they remained "fully committed" to the development of the Derry power plant and were currently in the process of finalising contracts for the new plant.

In a statement, both organisations said they expected other parties to show similar commitment to the project. "In light of the fact that approval has been granted to the gas pipeline project, including grant aid from the Assembly and the Government of the Republic of Ireland and European Union support, it would be surprising if Bord Gβis ╔ireann was anything but fully committed to the completion of the gas pipeline on schedule."