Oman has broken off negotiations with the preferred bidder for a estimated RO100 million ($260 million) private wastewater project in Muscat after failing to reach an agreement, according to media reports.

"There was a (May) deadline for negotiations to be completed but it was then extended to the end of June. When no agreement was reached with the consortium, the government ceased negotiations," a project source said.

The government is now understood to be making a decision on whether to implement the project through the public or private sector. "The most likely route is that the government will build the network itself, then corporatise it and finally privatise it," the source said.

Negotiations over the Muscat project have been taking place since 1994, when a group headed by the local Galfar Engineering & Contracting and the UK/US Ogden Yorkshire Water was selected as the preferred bidder.

Ogden was subsequently taken over by the US' Coventa Energy, which in early 2001 pulled out of the project citing a change in corporate strategy. It was replaced by Cascal, part of the UK's Biwater group. Since then, the consortium has lost another member, Bank Muscat, which had a small stake in the project.

The project called for a private investor to build, operate and finance a new wastewater treatment plant and associated network serving the capital.