Iran cancels gas deal with Crescent Petroleum

The National Iranian Oil Company (NIOC) has cancelled its contract with Sharjah's Crescent Petroleum to export natural gas to the UAE, according to a senior Iranian official. "The oil ministry's policy is the direct sale of gas to the UAE government," the semi-official Mehr news agency quoted Javad Oji as saying. According to the news agency, Mr Oji, who is the deputy oil minister of Iran and the managing director of National Iranian Gas Company (NIGC), also said the 25-year contract that NIOC signed in 1991 with Crescent had been "nullified".

"For the sale of gas to neighbouring countries, a unified price formula has been set and all negotiations will be conducted on the basis of this formula obtained on the basis of oil and oil derivative prices," he added. NIGC is a wholly owned unit of NIOC. Crescent, a privately owned oil and gas company, completed an under-sea pipeline to import up to 600 million cubic feet a day of Iranian gas in 2006. The pipeline linking Iranian facilities to produce gas from its Salman field in the Gulf to receiving facilities on the Sharjah coast has been sitting empty for the past four years.

"The Iranian official's statement appears to have been misinterpreted. ... The 25-year contract tweeen NIOX and Crescent is valid, internationally binding and currently in international arbitration, as is known, and neither side has cancelled it," a company spokesman said yesterday. NIOC completed commissioning of the Salman production facilities only last year, after long delays and after it had nearly finished building a pipeline from the gasfield to the Iranian mainland.

When the Iranian company continued to stall over sending gas to Crescent, the Sharjah firm sent its contract to an international court of arbitration and is awaiting a decision. The two parties were mired for years in an unresolved dispute over gas pricing, after Iran sought a higher price than stipulated in the original contract. Crescent reportedly offered to pay more for the Iranian gas, but was limited in its negotiations by the subsidised prices at which Sharjah's government-owned utility sells gas to industrial and residential customers in the emirate.

Iran's parliament has on several occasions denounced the export contract as "detrimental" to the country's national interest. NIOC, meanwhile, threatened to divert Salman gas earmarked for export to Sharjah for Iran's domestic market. Iran sits on the world's second biggest gas reserves, estimated at 1.05 trillion cubic feet, but has become a net importer of the fuel in recent years due to soaring demand from its power and industrial sectors. It also pumps vast amounts of gas into its aging oil reservoirs to push out more crude.

Several rounds of international sanctions on Iran over its controversial nuclear programme have stifled development of the country's gasfields as it has been unable to attract sufficient financing and equipment from abroad. The UAE is among the countries that have recently stepped up compliance with the sanctions. tcarlisle@thenational.ae