Dana to Receive Iran Gas in 2008

A02329173.jpgTEHRAN (FNA)- Dana Gas said yesterday it would start to receive the much-delayed natural gas supplies from Iran in mid 2008, although Tehran has remained silent over earlier statements by the UAE company that deliveries would start soon.

Dana Gas’ Executive Chairman told the annual meeting of the company’s general assembly in Sharjah that preparations to receive Iranian gas have been completed and expected revenues to surge from gas sales this year.

Hamid Jaafar said 2007 was a good year for Dana Gas and revenues could be even better this year as it pushes ahead with major projects in Egypt and other countries. He also spoke of planned “Gas Cities” outside the UAE.

“For 2008, Dana Gas aims to build on the strong foundations of 2007. In addition to the expected start-up of operations and revenues from both the import of Iranian gas and the Kurdistan region’s gas projects by the middle of this year, the company is also implementing an active $170 million (Dh623.9m‚ drilling campaign of 19 wells in Egypt, where we hope to increase our gas reserves to significantly increase production, and take full advantage of high energy prices,” he said.

“In addition to our major investments and expansions in Egypt, northern Iraq, and here in the new concession offshore Sharjah, we will also be expanding our concept of developing “Gas Cities” in other countries of the region, and pursuing further opportunities and acquisitions under study in the Persian Gulf and in North Africa.”

Iran has not commented on Dana’s statements last month that gas supplies ordered by the Sharjah-based company for sale inside the UAE would start arriving in summer this year after a delay of two years because of a dispute over prices.

Dana Gas, the first major private sector gas company in the Middle East, has not made it clear if the rift has been resolved

Industry sources said they still doubt that gas would be supplied unless Dana had agreed to Iran’s price terms.

“Dana Gas has said many times it expects gas supplies to start arriving soon but there has been a delay of nearly two years,” an Abu Dhabi-based oil source said.

“The latest statements might only reflect Dana’s hope that Iran would begin pumping gas… but I do not think this will happen without an agreement by Dana to pay higher prices because Tehran seems adamant.”

Dana did not say whether it had reached a new agreement with the Iranians, who have demanded a revision of their tentative 2001 price deal. Tehran justifies its demand by a sharp rise in oil and gas prices over the past few years and the fact that the deal involved a “give away” price.

In 2001, Crescent Petroleum, which co-owns Dana Gas, signed an agreement with the National Iranian Oil Company (NIOC) to import gas from the offshore Khuff reservoir associated with the Salman oilfield. But there have been repeated calls from Iranian officials to cancel the agreement and direct the gas for domestic use.

The contract to send gas to the UAE was signed following long negotiations between NIOC subsidiary Petroiran Development Company (Pedco), the operator of Salman-Khuff, and Crescent, when oil and gas prices were relatively low.

Iranian sources said the agreement calls for the supply of nearly 116 billion cubic meters of natural gas to the UAE over 25 years, with the initial sale of 330 million cubic feet a day rising to 600 million in Sharjah’s Hamriyah Free Zone. Iran’s gas sales were originally scheduled for January 2006.

Iran and Crescent have been locked in negotiations over pricing the gas for export, since it was signed in 2001. The deal ran into delays after a number of prominent politicians in Iran said the country would lose out because gas prices had risen sharply since the initial contract was signed.

After a report by Iran’s State Audit warned that the contract contained serious problems, Islamic Republic officials intensified efforts to put off the contract.

According to the report, if the contract was put into effect, Iran would have to sustain a sum of $44 billion of loss in 25 years.

Subsequently, Crescent voiced preparedness to revise the contract in September 2006.

Iran has said it would not export gas to the UAE until it secures a fair price.

“Until the price is corrected, we are not going to sell them (Crescent) natural gas,” Iran’s Oil Minister Gholam Hossein Nozari announced earlier.

The project involves supplying gas from Iran’s Salman field in the Persian Gulf to Crescent, which owns a separate company along with Dana Gas for the purpose of importing the fuel from Iran.

“If we do not succeed in correcting the price, we have other customers from Emirates and also Oman for the gas,” Nozari said.

“Also using the gas inside Iran is an option,” he added.

Oman and Kuwait are among the Persian Gulf Arab states seeking natural gas supplies from Iran, which holds the second-biggest natural gas reserves in the world after Russia.

The UAE needs the gas to meet rapidly rising domestic demand from industry and power plants.

An Iranian official said last year construction of Iran’s side of the project was in the final stages, but labor shortages have dogged new energy projects worldwide, contributing to rising costs and startup delays.

Crescent’s affiliate Dana Gas will process and transport the gas to utilities and industrial users in the UAE.

The United Arab Emirates holds the world’s fifth largest gas reserves but has failed to exploit them quickly enough to meet spiraling demand as record oil revenues fuel economic expansion.

Meantime, Dana’s Executive Chairman Jaafar told the general assembly on Sunday that the year 2007 saw Dana Gas “achieve its first revenues and operating income, and make important new entries into all areas of the natural gas business in Egypt and northern Iraq, while building upon its positions and assets in the UAE”.

Announcing results for 2007 last month, Dana Gas said revenues stood at Dh1.036 billion despite being the first year of commercial operations.

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