RPT-Portland Gas to start Portland project construction

* Plans to start work on Portland Project on July 31

* Contracts Hydrock to undertake work worth about 300,000 stg

* Says will launch process to secure full funding

* Settles outstanding liabilities with Portland Port

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July 14 (Reuters) - British gas storage firm Portland Gas Plc (PRTG.L) said on Tuesday it planned to start construction of the Portland project on July 31 and that initial works on the wellpad would be performed by Hydrock Group Ltd.

The company, which has two active projects with capacity to meet about 10 percent of the total UK and Ireland peak daily demand, said it would launch a formal process shortly to secure full funding for the Portland project.

Portland Gas said Hydrock would undertake work to a value of 300,000 pounds ($489,200) on the Portland Project in Dorset and that this would be funded by a redeemable debenture granted to Hydrock.

The instrument may be redeemed until Jan. 31, 2010, after which it will be converted into 369,595 shares in Portland Gas.

At 35 billion cubic feet of working gas, the Portland Project will be the largest onshore gas storage facility in the UK, according to the company.

Portland Gas said it also reached an agreement with Portland Port Ltd to settle all outstanding accrued liabilities related to the company's lease of land adjacent to the site of the gas storage facilities -- the East Weares estate -- up to July 31, 2009 by the issue of 919,474 new shares.

Both these agreements are based on an issue price of 81.17 pence per share, Portland Gas said.

Portland Gas shares were up about 0.7 percent at 72 pence by 1059 GMT on the London Stock Exchange. ($1=.6133 Pound) (Reporting by Ramkumar in Bangalore; Editing by Himani Sarkar)