Sharjah-based energy company Dana Gas says its affiliate Crescent Petroleum’s facilities are ready for the import of gas from Iran, should the National Iranian Oil Company (NIOC) indicate its willingness to deliver gas through an existing pipeline that has so far remained unused.
“It is to my understanding that Iranians have indicated that they were ready to deliver gas, and we as Dana Gas are ready," chief executive Patrick Allman-Ward told The National in an interview on the sidelines of Abu Dhabi International Petroleum Exhibition and Conference (Adipec) on Wednesday.
"But clearly we need to be satisfied that the supplies of gas will be reliable and not interrupted and of course we would need even if we were given that assurance in terms of volumes and duration.
“We would now 12 years later need to go back and try and establish our customer base for the gas because obviously in the intervening 12 years our clients have gone off and got alternate sources of gas for energy as the case maybe,” he added.
Iranian petroleum minister Bijan Zanganeh said in an interview in July that the NIOC had notified Crescent Petroleum of its readiness to export gas to the UAE via pipeline.
“We have announced to Crescent Petroleum Company that we are ready to export and all technical and engineering processes have been completed,” he said in an interview with Iran News.
The NIOC and Crescent Petroleum entered into an agreement in 2001 to deliver 600 million cubic feet a day to Sharjah from the offshore Salman field via an under-sea pipeline. However, the project soon became mired in a legal dispute over pricing, as well as allegations of corruption.
Apart from a test run in 2010, which found leaks during transmission, the pipeline has remained unused.
Allman-Ward said that settlement on its legal dispute with the NIOC “was in progress” and the company would await results of an ongoing arbitration to assess scale of damages.
In 2014, an international tribunal ruled in favour of Dana Gas saying the 25-year supply agreement between both parties was valid and binding and the Iranian state-owned firm had been obligated to deliver gas since 2005.
The following year, the Sharjah-based producer said that an arbitration tribunal in The Hague had commenced damages assessment phase in what could result in a multibillion dollar award for Dana Gas.
Iran’s readiness to supply gas could possibly be motivated by its intention to pay its fines in kind as it still lacks the mechanisms to pay in cash due to sanctions-related restrictions on financial transactions with Tehran.
“There was a hearing in October of this year because the tribunal requested that certain post-hearing clarifications on matters of Iranian law," said Mr Allman-Ward.
"Both sides made representations in October on that matter and we’re essentially waiting the outcome of the tribunal’s decision on the scale of the damages award that they will make,” he said.
Crescent Petroleum’s facilities are currently up to speed to be able to receive gas once settlement has been reached, he added.
“We’ve been keeping our facilities on care and maintenance and from the moment they say they can and will deliver. We will need to bring our systems up to speed and that obviously won’t be overnight and that will take a certain period to take all our existing assets and make them ready for the introduction of gas into the system,” he said.
Iran has the world’s largest proven gas reserves, estimated at 18 per cent of the world’s total, according to the latest BP Statistical Review of World Energy. However, nuclear-related sanctions, that came into effect in 2006, have crippled its ability to exploit its vast hydrocarbon wealth. Apart from pipeline supplies of 7.7 billion cubic metres (bcm) to neighbouring Turkey, Iran consumed nearly all of the 202.4 bcm it produced last year.
The Islamic Republic is also forced to depend on pipeline imports from Turkmenistan to keep households heated during its harsh winter months.
Following the nuclear deal Iran signed with P5+1 countries in January 2016, NIOC has pushed to revive gas production and make the country a liquefied natural gas producer for the first time.
In July, a consortium led by French energy giant Total, China National Petroleum Corporation and Iran’s Petropars signed a $4.8bn agreement with NIOC to develop phase 11 of the massive South Pars gas field, which is shared with Qatar.