CANBERRA, Jan 28 (Reuters) - The chance of producing more water-effective varieties of rice to address looming water shortages across Asia in the next 20 years are looking very promising, a leading global rice research group said on Tuesday.

Ron Cantrell, director general of the Philippine-based International Rice Research Institute (IRRI), said scientists were making good headway in developing "aerobic" types of rice that can grow under non-flooded conditions.

He said it was crucial to find more water-efficient ways to grow rice, the staple food for most people in Asia which is home to 60 percent of world population.

"There's no doubt in Asia the key issue for the next two decades is fresh water as we could see a 30-40 percent drop in the availability for agriculture in the next 20 years," Cantrell told Reuters in an interview during a five-day Australia visit.

"We think you could grow rice like wheat with intermittent irrigation and maybe use 50 percent less water but the key is the effect on productivity.  Right now it looks very promising."

Cantrell said the sprawl of urbanisation had increased the demand for fresh water across Asia, highlighting the need to find better ways to cultivate rice which needs two to three times more water than wheat and maize to grow.

About 55 percent of Asia's rice areas is irrigated, accounting for 75 percent of total production.

But as the competition for water intensifies so does the demand for rice, with the institute projecting the number of people eating rice by 2005 will almost double to 4.6 billion from the current 2.5-2.8 billion people.

Cantrell said the way forward was twofold - firstly developing varieties that use less water by preparing land differently and using sporadic irrigation, and secondly by genetic modification (GM), building on the recent breakthrough decoding the draft rice genome sequence.

"I would say within the next five years we would have new varieties out of traditional breeding," Cantrell said.

"However, there is no doubt as we learn more information about gene functions from new technologies that we will be able to identify new genes in rice and sorghum that could be used in rice to make it more hardy and more drought resistant."

Cantrell said although some GM varieties of rice had already been developed in China and in India, these were not expected to be grown commercially for about two years.