An Omani official said a main stumbling block was India's insistence on buying the entire output of the plant, to be completed in 2004, for at least ten years.
Oman wants more flexibility, allowing it to sell to other clients.
The official Oman News Agency reported earlier on Saturday that the Gulf Arab state and India were expected to sign the agreement soon. It did not elaborate. Ajay Misra, one of the Indian officials taking part in the talks, told Reuters that under an earlier deal, Oman was obliged to sell the entire production to India. He added that project officials had already shortlisted Snam, the gas distribution arm of Italian oil and gas company Eni or France's Technip to build the plant. The project, delayed several times since 1997, received a boost last month when India's cabinet finalized the terms and conditions for the joint project.