Kurdish outlay saved costs, says Dana Gas

Dana Gas’s first-quarter results are due early next month. Dana Gas / Reuters

Dana Gas touted the benefits of its investment in the Kurdish region of Iraq, ahead of the company's first-quarter results.

Dana Gas and its largest shareholder, Sharjah-based Crescent Petroleum, commissioned the consultant firm PwC to produce the report, which says that the US$1.2 billion of invested by the Pearl Petroleum Consortium to develop the Khor Mor and Chamchamal fields saved the region $16bn in fuel costs in the six years to the end of 2014.

The release of the report comes ahead of Dana Gas’s first-quarter results, due early next month, which are expected to show an improvement in cash flow from the Kurdish operations.

Dana Gas and Crescent Petro­leum – joint operators of Pearl, which includes European shareholders OMV, MOL and RWE – has won a series of decisions in a long-running legal dispute with the Kurdistan Regional Government (KRG) about its rights to sell shares in the project as well as entitlement to payment for production of petroleum products from the gasfields.

These culminated in a judgment by the London arbitrator in November that they were owed $1.98bn, backed up by another London court ruling that the KRG did not have sovereign immunity and must immediately pay $100 million.

Dana Gas further settled out of court with RWE for an undisclosed amount that resulted in RWE taking up its 10 per cent stake. That settlement resulted in Dana Gas reporting a fourth-quarter profit of $134m instead of an expected loss.

The first-quarter results will also reflect some of the RWE settlement and they will be closely watched for signs that the KRG is moving to pay down some of its massive arrears.

Dana Gas is outside of a deal the KRG reached earlier this year to start paying other foreign operators what they are owed, including paying a percentage of arrears. Companies benefiting from that deal included RAK Petroleum-controlled DNO.

The PwC report is not dir­ectly linked to negotiations but is regarded as part of the campaign to try to reach a negotiated settlement.

“We hope to expand our investments and production under our contract going forward for the benefit of the people of Kurdistan region and all of Iraq,” said Majid Jafar, the chief executive of Crescent Petroleum and board managing director of Dana Gas.

Dana Gas has repeatedly said resolution of the dispute would result in resumed investment, including plans to pipe natural gas into Turkey’s system so it can be exported to European markets.

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