Iranian Salman gas deal is binding, says Crescent

03 March 2006

The deal to supply gas from Iran's Salman field via subsea pipeline to Sharjah is 'internationally binding', Sharjah-based Crescent Petroleum Company, the importer of the gas, told MEED in late February. The comments followed media reports citing Iranian officials as saying that the deal between state-owned National Iranian Oil Company (NIOC) and Crescent could be cancelled if the agreed gas price was not adjusted.

'The contract, which was signed in 2001 after seven years of professional and transparent negotiations, is Iran's first cross-border regional gas export project in the Gulf and is firm and internationally binding on both parties,' a Crescent spokesperson said. 'Indeed, both sides have been actively implementing and constructing the extensive necessary infrastructure, which is more than 90 per cent complete, and have invested to date a combined total of well over $1,000 million.'

Iranian media reports had quoted Tehran's head of the state audit organisation, Mohammad Reza Rahimi, as saying that the gas deal would need to be reviewed to determine whether its terms are still acceptable. Rahimi indicated that the price for the gas was below market rates. No details have been released on the price being paid by Crescent to NIOC. However, the price for 1 million BTUs of gas in the Gulf ranges from $0.75 to $1.40.

'As for any issues of gas pricing, there are proper mechanisms in the contract for addressing these over the 25-year life of the agreement, which is normal in the industry,' the spokesperson said.

Crescent plans to import the gas through Crescent Natural Gas Corporation (CNGC), in which it holds 65 per cent. The remaining 35 per cent is held by Sharjah-based Dana Gas, which in turn is owned by Crescent, Bank of Sharjah, the Sharjah government and other Gulf investors.

The pipeline, which will transport between 600 million-900 million cubic feet of gas from Salman via Sirri island to Crescent's offshore facilities at Mubarak, is close to completion. 'The wells have been drilled and 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,' the spokesperson said. 'First gas deliveries are expected by the middle of this year.'

Abu Dhabi-based National Petroleum Construction Company (NPCC) has laid the pipeline section from Mubarak to the onshore gas processing plant at Sajaa, which is being constructed by UAE-based Petrofac International. Sajaa Gas Private Company (SajGas), 100 per cent owned by Dana Gas, is the owner and operator of the plant. Another 100 per cent owned Dana Gas subsidiary, United Gas Transmissions Company (UGTC), is the client on the Mubarak-Sajaa pipeline. It is also the client on the build-own-operate (BOO) agreement with Emirates General Petroleum Corporation (Emarat) for a 48-inch-diameter, 30-kilometre-long onshore pipeline which will transport the gas from Sajaa to Hamriyah free zone (HFZ) in Sharjah emirate.

UGTC in late February awarded Australia's Worley-Parsons the contract to carry out the detailed engineering and front-end engineering and design (FEED) for the pipeline, which will feed the Hamriyah power plant planned by Sharjah Electricity & Water Authority (SEWA).

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