Crescent's $1B Iran UAE Gas Deal May be Hijacked by Rivals

DUBAI May 14, 2007 (Dow Jones Newswires)

A crucial deal involving Crescent Petroleum and Dana Gas to import gas via a $1 billion project into the U.A.E. from Iran could be hijacked by rival companies in the emirates, a company official said Monday.

Emirates National Oil Co. and RAK Petroleum may seek rival deals with Iran for up to 1 billion cubic feet a day of gas if Dana and Crescent fail to agree terms with Tehran after a year of delays, Hussein Sultan, Enoc's Chief Executive and deputy chairman of RAK Petroleum told Dow Jones.

"Everybody would like to get the Iranian gas," Sultan told Dow Jones on the sidelines of a conference in Dubai on Monday. "Personally, if I had the clearance, I would go for it."

Sharjah-based Crescent, which is controlled by the Jafar family, has been locked in a dispute with Iran over the supply of gas to its partner Dana, which was due to begin last year. Dana Gas would then supply the gas to customers in the northern emirates.

Crescent, which owns 21% of Dana, signed a contract with the state-owned National Iranian Oil Co. to begin gas supplies to the U.A.E. starting second-quarter last year via a $1 billion pipeline project. Iran has since blocked the venture as it seeks a higher price than was orginally agreed for the gas.

Iran's oil minister, Kazem Vaziri Hamaneh, issued an ultimatum to Crescent and Dana over the weekend, demanding a higher price to supply the gas. Hamaneh said Iran would consider "an alternative" to the Crescent deal, according to a report in an Iranian newspaper.

Rashid Al Jarwan, General Manager, of Dana Gas declined to comment when called on Monday by Dow Jones. Officials from Crescent were unavailable for comment when called.

Dana's shares, which trade on the Abu Dhabi Stock Exchange, closed down 0.7% at 1.4 UAE dirhams on the news that rival energy companies could hijack their deal.

"If Iran gave the gas to someone else shares would fall," Abid Riaz, an analyst at EFG Hermes, which rates Dana's shares 'neutral', told Dow Jones. "If they didn't finalize the contract Dana Gas would have to seek alternatives because it has signed agreements."

Shortages of gas in the United Arab Emirates, the second-largest Arab economy in the Middle East after Saudi Arabia, could crimp economic growth as consumers may have to pay more for utilities such as power and desalinated water.

"Dubai is the biggest net importer and user of gas. Already our demand is close to 1 billion cubic feet a day," Sultan said. "We haven't even thought about how we will supply industrial users," Sultan said. "Who knows how high it will be in 2015."

The second-largest sheikdom in the U.A.E. after Abu Dhabi, with an official population of about 1.4 million people, Dubai consumes almost the same amount of natural gas as New York. The U.S. state and its surrounding areas burned an average of 1.1 billion cubic feet a day of gas in 2005, according to the U.S. Energy Information Administration Web site.

Dolphin Energy, a joint-venture between Abu Dhabi's government, Occidental Petroleum Corp. (OXY) and Total SA (TOT), is the other source of gas from outside the emirates that can meet expected shortfalls in supply.

The pipeline is expected to begin pumping as much as 2 billion cubic feet a day of gas from Qatar's North Field reservoir, the world's single-largest gas deposit, to the emirates and Oman this year.

The Qatari gas will still fall short of meeting demand that's growing at 11% a year, one of the world's highest rates.

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