Iran to build refinery, supply gas to Pakistan in food barter

* Pakistan president to sign MOU for refinery next week

DUBAI Feb 21 (Reuters) - Iran has agreed to help build an oil refinery for Pakistan and supply its energy-hungry neighbour with natural gas in a barter deal for food, Iranian media reported on Thursday.

Officials from the two countries agreed on Wednesday that Iran would help Pakistan State Oil (PSO) build a refinery and accept wheat, meat and rice as payment for fuel produced, Fars news agency reported a Pakistani energy official as saying.

Iran, which has huge reserves of gas but exports little due to sanctions, has also agreed to complete Pakistan's part of a long-planned gas pipeline and accept payment in food for gas supplied through it.

"We had very good meetings and we had a lot of bilateral talks especially on Iran-Pakistan gas pipeline project and setting up oil refinery at Gwadar with PSO," Pakistani official Asim Hussain was quoted by Iran's state news agency IRNA as saying after a meeting with Iranian oil minister Rostam Qasemi.

Iranian media said Pakistan President Asif Ali Zardari would sign a memorandum of understanding for the 400,000 barrel per day (bpd) refinery at Gwadar, on the coast of Pakistan near the border with Iran when he visits Tehran next week.

Pakistan is increasingly reliant on fuel imports, while western sanctions have made it difficult for Iran to export crude oil or repatriate the funds from what it can sell.

Iran has already laid its part of a long-planned gas pipeline to Pakistan. But Islamabad, under pressure from Washington, has been slow to start work.

Tired of waiting, Iran has now agreed to help build the 750-km pipeline across Pakistan, deputy minister of petroleum for gas, Javad Oji was quoted by Iranian oil ministry website Shana as saying after Wednesday's meeting.

Oji said the two sides had agreed that the pipeline would be completed in time to start delivery of 21.5 million cubic metres of gas per day to Pakistan by December 2014. (Reporting by Daniel Fineren and Marcus George; editing by James Jukwey)