Home / Dana’s only supplier hits procurement snag in Iran

Dana’s only supplier hits procurement snag in Iran

Will delay in Crescent’s contract affect Dana’s gas supply to customers, including FEWA, in the UAE?

Sharjah-based Dana Gas has confirmed that all of its gas comes from Crescent Petroleum. Crescent is currently embroiled in a row with the Iranian government over the price that it pays National Iranian Oil Company (NIOC) for gas.
When Oil&Gas Middle East asked Rashid Al Jarwan, general manager, Dana Gas, if the dispute was going to result in a delay of supply to Dana’s UAE customers, Al Jarwan said that the issue was not for him to discuss and that Dana would merely deliver the gas that Crescent supplied it.

“I cannot say whether it is delayed or not, the issue is not for me to discuss. The contract is for Crescent to handle. We will only be involved in distributing the gas that Crescent gives us,” he said. Dana Gas has signed contracts for the supply of gas to Federal Electricity and Water Authority and Sharjah Electricity and Water Authority for a 25-year period.

The dilemma that Dana may have will not be finding gas to fulfill its commitments, but finding gas at the rate at which the Iranians agreed to, which is equivalent to $18 per barrel of crude, based on which Dana has drawn up the contracts with its customers. Oil&Gas Middle East has also confirmed with Dana’s media advisor, Ahmed Samerai, that the company gets all its gas from Crescent.

Though neither Dana Gas nor Al Jarwan gave any time line for the delivery of the Iranian gas, supplies should have begun in November 2005, according to the Iranian news agency, ISNA. When asked if Dana would like to share information with its investors regarding the possible loopholes in this contract (supply of gas to the UAE), Al Jarwan said, “It [Dana Gas] was not formed for the purpose of this one contract. It was formed for investments in various aspects of the oil and gas industry, from upstream to the petrochemical sector.” He also said if there was a need to communicate anything to investors, it would be communicated through “proper channels”.

However, Al Jarwan said that Dana Gas was talking to various producers and producing countries about gas supply. He did not conclusively say whether or not supply to its customers was going forward, with or without Crescent Petroleum.

But, it may be a while before Crescent Petroleum gets its gas from Iran as the Iranian State Audit Court has accused the Iranian national oil company, NIOC, of committing fraud by agreeing to such a cheap gas deal. The Iranian oil minister, Kazem Vaziri Hamaneh has further thrown the contract in doubt by stating that the draft contract exists only on paper.
“The state audit court accused the ministry of a US $21 billion fraud together with the Crescent company, whereas, no contract has been implemented with that company and no gas has been exported on the basis of the draft contract,” Vaziri Hamaneh said.

The debate was started by Mohammad Reza Rahimi, director general of the State Audit Council, last month, when he said, the contract for exporting Iranian gas to the UAE via Crescent should be revoked, as serious doubts over the feasibility of the contract have cropped up.

“According to this contract, the UAE would gain $8 billion in profit and $4 billion would be given to an unknown brokerage company called Crescent. “The contract would be valid for 25 years starting 2005,“ he told the Iranian media, adding that last year, former president Mohammad Khatami allegedly assigned the Supreme National Security Council to examine this contract, but the oil industry officials did not allow for the nullifying of the contract. He claimed that the National Iranian Oil Company had granted special privileges to Crescent. “There are no doubts that there are violations in the contract,” he said.

Rahimi explained that one “violation” pertains to the fact that during the first seven years of the contract the price per cubic feet of gas exported to the UAE would remain fixed at $18. “The low price of gas and the presence of a brokerage company are the two main problems,” he said, calling on the Majlis to revoke the contract. This contract is further being delayed as the Iranian parliament has put the debate on hold until the national budget. Meanwhile, the UAE energy minister, Mohammed bin Dhaen Al Hamli, according to unconfirmed reports, has sent a letter to Crescent Petroleum to inquire about the company’s ability to fulfill its commitments to customers and provide gas to Federal Electricity and Water Authority (FEWA).

Reports suggest that Crescent Petroleum has not yet reverted back to the UAE ministry. Internal conflicts in the Iranian government and Vaziri Hamaneh’s arguments that the contract, which was drawn up when oil prices were lower, exists only on paper may further add confusion to the already uncertain gas deal. Crescent recently put out a statement in which it says, “The 30-inch pipeline has already been laid by NIOC to Crescent’s offshore facilities, although Crescent understands there has been a technical delay of a few months in the completion of one of NIOC’s offshore gas gathering platforms, which is not unusual in the industry these days. First gas deliveries are expected by the middle of 2006.” The statement also said, NIOC has an unblemished record of honouring all its agreements.

It will soon be known, whether or not it will honour this one.

Follow us to get the most comprehensive technology news in UAE delivered fresh from our social media accounts on Facebook, Twitter, Youtube, and listen to our Weekly Podcast. Click here to sign up for our weekly newsletter on curated technology news in the Middle East and Worldwide.

REGISTER NOW | Webinar Event | Security you can bank on – Safeguarding the Middle East’s financial sector

Presented in partnership with security and network specialist Cybereason, the second in the three part webinar series will bring together a panel of experts to discuss how banks and financial institutions are evolving their service offering while simultaneously staying one step ahead of the cyber criminals who seek to bring their operations crashing to the ground.