Iran, UAE Have yet to Agree on Gas Deal

A02695601.jpgTEHRAN (Fars News Agency) Iranian Offshore Oil Company (IOOC) head Monday said if Iran and the United Arab Emirates (UAE) reached an agreement, his country would for the first time export over 540 million cubic feet of gas per day to an Islamic neighboring state.

Mahmoud Zirakchianzadeh told PIN that 500 million cubic feet of export-bound gas would be supplied by Salman field and the remaining by associated gases.

The IOOC managing director added in case the two sides failed to reach an agreement, gas produced by Salman field would be transferred to Assaluyeh, southern Iran, for domestic consumption.

Salman field also produces 60 thousand barrels of oil daily and its development plan is undergoing the outlining stage.

Iran ruled out supplying natural gas to Dana Gas unless the UAE company agrees to pay higher prices.

Oil Minister Gholam Hossein Nozari said an alternative pipeline was under construction in Iran to divert gas destined for Sharjah-based Dana to the Iranian market if the two sides failed to reach a deal involving higher prices, Emirates Business 24/7 reported.

He said that the National Iranian Oil Company (NIOC) had already carried out early engineering and design work on the alternative pipeline to supply the port of Assaluyeh, where it could be used for gas re-injection.

“Iran’s High Economic Council has approved the plan to use the gas domestically. We are already working on the pipeline. If we do not reach an agreement … for a higher price, the gas will be sent to Assaluyeh,” Nozari told the Norwegian international oil and gas weekly, Upstream, in an interview to be published this week.

In 2001, Crescent Petroleum, which co-owns Dana, signed an agreement with 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 deal because of what they say are giveaway prices negotiated with Crescent.

NIOC officials said the first supplies from Khuff should start in the second half of 2008 leaving time to revise the price formula with Crescent, which is controlled by Sharjah. Except for a gas production platform and living quarters, all elements of the Salman-Khuff field development are complete.

It will take six months for the two platforms to be completed, according to NIOC officials.

Iranian official sources said the agreement called for the supply of about 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 2005.

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 low. Iranian gas supplies will be marketed in the UAE by Dana Gas.

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