Munich  - A German gas company, Bayerngas, confirmed Thursday that it would assist Iran's main oil company to develop filling stations that will supply cars with compressed natural gas (CNG).

Iran has the second-largest reserves of natural gas in the world and is keen to use the gas to power transport. Most conventional petrol-powered cars can be adapted to run on natural gas.

A Bayerngas spokesman in Munich said a report in the newspaper Financial Times Deutschland that Bayerngas had opened an office in Teheran was correct. The newspaper said the move might lead to conflict, though it did not breach any UN sanctions against Iran.

The new operation is to be run by Bayernservices, a unit with gas engineering expertise.

Gas filling stations operate in major German cities. Gas power, which is cheaper than petrol or diesel, is mostly used by big fleets or by taxis, but has never become popular with private motorists.

Bayerngas was engaged for the work by NIOC, the state-run Iranian oil company, and was likely to supply technicians to install the filling equipment at the retail outlets.

The spokesman said Bayerngas was keen to expand its technical services operations, but declined to say how much the Bavarian company was investing in Iran or to predict the likely level of sales there.

The newspaper said Bayerngas had not publicized the move in its native Germany, but had made its announcement in Iran instead.

The company had not contracted to buy anything from Iran and was not currently seeking to buy Iranian gas, the newspaper quoted a Bayerngas spokesman saying.(dpa)