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Partnership set to invest US$8 billion in gas resource development and infrastructure; production potential of 3 BCF/day

Sharjah - 17th May 2009

Dana Gas PJSC, the Middle East’s first and largest regional private-sector natural gas company, and Crescent Petroleum, the Region’s oldest private exploration and production company, are pleased to announce strategic partnership agreements with OMV, Austria's largest listed industrial company and a leading Central European integrated oil and gas group, and MOL Hungarian Oil and Gas Company, Hungary’s largest listed company and also a leading Central European integrated oil and gas group, which is set to transform the prospects for Iraq’s gas industry to become a major and secure gas supplier to local, regional and European markets.

Signed at the Companies’ head offices in Sharjah, UAE, by and between Badr Jafar, Executive Director of Crescent Petroleum, Rashid Jarwan, Executive Director of Dana Gas, Helmut Langanger, OMV Executive Board member responsible for Exploration and Production and Zoltan Aldott, Executive Vice President of MOL, the groundbreaking partnership is based upon OMV becoming a 10% shareholder in Pearl Petroleum, the company which holds Crescent Petroleum and Dana Gas’ upstream interests in the Kurdistan Region of Iraq, in return for a payment of 350 million US dollars, which in turn will be re-invested in the development of the project; and with MOL based upon around reciprocal shareholdings of their respective companies: MOL will become a 10% shareholder in Pearl Petroleum and Crescent Petroleum and Dana Gas will each become 3% shareholders in MOL, listed on the Budapest, Luxembourg and Warsaw Stock Exchanges. This arrangement unites the Middle East’s leading independent E&P companies with two of Europe’s most dynamic integrated oil and gas companies and the original architects of the Nabucco gas pipeline project.

These partnership agreements between the companies represents a significant vote of confidence in the investment policies and climate of the Kurdistan Regional Government of Iraq and illustrates the companies’ strong belief in the growth potential of the Kurdistan Region of Iraq’s natural gas assets to develop into one of the most significant gas export projects in the region within the next few years. In due course, this will establish Iraq as one of the region’s major gas exporters, once local requirements have been met.  

Over the past two years Crescent Petroleum and Dana Gas have jointly invested 605 million US dollars in the successful fast-track development of the Khor Mor gas field and a local natural gas network, including construction of a 176km natural gas transmission pipeline in record time, efficiently enabling local gas-fired power generation plants to provide secure electricity supplies to over 4 million Iraqis, and reduce local oil consumption expenditure which in turn has led to savings in governmental fuel costs of approximately 2 billion US dollars per year. The project partners will now push forward with substantial new investments in the Kurdistan Region of Iraq estimated to be in the order of 8 billion US dollars to further develop the companies’ assets, and facilitate the provision of gas for increased Iraqi power generation capacity and encouragement of local Iraqi industry as a priority, and facilitating the subsequent exports of surplus natural gas into neighbouring countries, including Turkey and beyond into Europe, benefitting local, regional and European economies.

Badr Jafar, Executive Director of Crescent Petroleum stated “Our joint project in the Kurdistan Region now has the full potential of linking the Region’s significant gas reserves to Europe by pipe for the first time, after satisfying all local requirements of course.  This will create very material investments in the Kurdistan Region of Iraq in the coming years, with significant employment opportunities and ancillary benefits for all of Iraq and Iraqis, and for the entire region.” 

Zoltán Áldott, Exploration and Production Executive Vice President of MOL commented, “We are proud to enter into this ground-breaking partnership, which evidences our confidence and commitment to the policies and potential in the Kurdistan Region of Iraq. Today’s agreement combines the strengths of two leading Middle East energy companies with two leading central European energy companies, and is the first step in jointly pursuing our combined objectives and achieving major economic benefits for both regions. Through this strategic co-operation MOL strengthens the realization of the Nabucco project aimed to increase European gas supply security and complements its strong Central European gas midstream position to significant upstream natural gas sources. We very much welcome our two new strategic shareholders from the Middle East, who will support our business activities further with their extensive business relationships and profound oil and gas business knowledge to create further shareholder value in line with our strategy.”

Helmut Langanger, OMV Executive Vice President responsible for Exploration and Production stated: “OMV is very pleased to announce a long-term partnership between OMV, MOL, Crescent Petroleum and Dana Gas in this project. OMV now has the rare opportunity to participate in the appraisal, development and production of very large gas reserves close to the European market which has significant potential to serve as feedstock for the Nabucco pipeline. This transaction will significantly enhance OMV’s position within the Middle East especially as OMV sees the Kurdistan Region of Iraq as an important area for growth.”

Rashid Al-Jarwan, Executive Director of Dana Gas commented “Dana Gas and its partner Crescent Petroleum greatly look forward to these strategic partnerships with OMV and MOL, and of being constructive core shareholders in MOL. We are very pleased to have demonstrated that constructive reciprocal shareholdings such as these can cement co-operation in world-class private sector-led integrated energy projects, with a positive global impact.”

The announced partnership adds the final necessary component to fully realise the future export potential of this world-class energy project by creating a vertically integrated gas partnership from upstream, to midstream and to final gas markets based on the pooled, complementary strengths of the project partners.  Both OMV and MOL are each 16.67% shareholders in the Nabucco project and the original architects of this major natural gas supply scheme. Some of these other key ingredients include:


Significant gas reserve potential confirmed in the company’s assets, which can fulfil local and regional, including Turkish, gas requirements as well as substantial gas exports to Europe.
Dana Gas and Crescent Petroleum’s proven local and regional expertise in developing all the necessary project facilities and infrastructure in record time.
Increasingly positive relationships developing with neighbouring Turkey, which is an important gas market and an energy corridor into Europe.
The companies’ gas project in the Kurdistan Region of Iraq is currently producing 90 million standard cubic feet per day of gas with associated condensate and LPG’s, and has potential for producing over 3 billion standard cubic feet of gas per day including substantial volumes of associated liquids by around 2014.
Notes:

1. In April 2007 Crescent Petroleum and Dana Gas signed long-term agreements and a Strategic Alliance Protocol with the Kurdistan Regional Government of Iraq, to appraise, develop, process and transport natural gas from the Khor Mor Gas Field, and also to concurrently appraise the potential of the Chemchemal Gas Field for development, as part of a strategy to advance regional economic benefits through development of the region’s substantial gas resources. Khor Mor and Chemchemal are major gas fields in northern Iraq.

2. Dana Gas and Crescent Petroleum have invested 605 million US Dollars to date in the project, and are currently supplying some 90 million standard cubic feet per day to local power plants, with production and processing capacity on track to increase step-wise to 300 million standard cubic feet per day by the end of 2009.

3. Pearl Petroleum is the company which holds legal title to the upstream interests of both Crescent Petroleum and Dana Gas. Prior to the announcement of the above deal with OMV and MOL, Pearl Petroleum was owned 50% by Crescent Petroleum and 50% by Dana Gas. Following the deal, the shareholding of Pearl Petroleum will be as follows: 40% Dana Gas, 40% Crescent Petroleum, 10% OMV and 10% MOL.

4. The Nabucco project is a project linking Middle East and Caspian natural gas sources to Europe through a new gas transmission pipeline. The project is currently planned to have final capacity of about 3 billion cubic feet of gas per day, with completion of the first 1.5 billion cubic feet per day capacity phase around 2015. The shareholders in the Nabucco project, each with a 16.67% stake, are Austria’s OMV, Hungary’s MOL, Bulgaria’s Bulgargaz, Romania’s Transgaz, Turkey’s BOTAŞ, and Germany’s RWE.

About Dana Gas
Dana Gas (PJSC) is the first regional private-sector natural gas company in the Middle East, established with over 300 reputable founder shareholders from across the Gulf Cooperation Council (GCC) region, and some 300,000 investors from over 100 nationalities worldwide who submitted applications of over US$78 billion over ten days in the company’s regional IPO in late 2005.  Headquartered in Sharjah in the UAE and listed on the Abu Dhabi Stock Market (ADSM), Dana Gas already possesses a network of offices in Saudi Arabia, Egypt, the UK, and Iraq, with further offices opening throughout the Middle East.  Dana Gas currently has assets and projects in gas exploration and production, processing, transportation and marketing in the UAE, Egypt and Iraq, and aims to play a major role in the rapidly-growing natural gas business throughout the Middle East North Africa and South Asia (MENASA) Region across the entire gas value chain.  In addition to its current projects, Dana Gas will be expanding its activities in all elements of the natural gas value-chain, including upstream exploration and production; through the midstream transmission and distribution of gas including LNG trading; and downstream into gas-related industries and petrochemicals.

About Crescent Petroleum
Crescent Petroleum is the oldest private exploration and production company in the Middle East, with over 40 years of experience as an international operator in numerous countries including Egypt, Pakistan, Yemen, Canada, Yugoslavia, Tunisia, Argentina, in addition to its continuing local operations in the United Arab Emirates.  Headquartered in Sharjah in the UAE, Crescent Petroleum has international offices in the UK, Iran, and three locations across Iraq, as well as affiliated offices in Egypt, Canada, Saudi Arabia, and Bahrain. Crescent Petroleum is also the largest shareholder in Dana Gas, the Middle East‘s first and largest regional private-sector natural gas company.

About OMV
With Group sales of EUR 25.54 bn and a workforce of 41,282 employees in 2008, OMV Aktiengesellschaft is one of Austria’s largest listed industrial companies. As the leading energy group in the European growth belt, OMV is active in Refining and Marketing (R&M) in 13 countries. In Exploration and Production (E&P) OMV is active in 17 countries on four continents. In Gas & Power (G&P) OMV sells approximately 13 bcm gas per year. Via Baumgarten, one of the most important turntables for gas in Europe, approximately 66 bcm gas is transported annually. OMV’s Central European Gas Hub is amongst the three largest hubs in Continental Europe. OMV is the leading energy group in the European growth belt with oil and gas reserves of approximately 1.2 bn boe, daily production of around 308,000 boe and an annual refining capacity of approximately 26 mn t. OMV now has 2,477 filling stations in 13 countries. The market share of the group in the R&M business segment in the Danube Region is now 20%. OMV further strengthened its leading position in the European growth belt through the acquisition of 41.58% of Petrol Ofisi, Turkey’s leading company in the retail and commercial business. In June 2006, OMV has established the OMV Future Energy Fund, a wholly owned subsidiary to support projects in renewable energy with more than EUR 100 mn to initiate the change from a pure oil and gas group to an energy group with renewable energy in its portfolio.

About MOL
MOL Plc. is a leading independent, international and integrated oil and gas company in Central-Eastern Europe, headquartered in Budapest. It has operations in Europe, Middle East, Africa and the CIS member states and it employs over 17.000 people worldwide. MOL also owns 3 highly complex refineries in Hungary, Slovakia and Italy with a sales turnover of 18.1 mtpa and according to Wood Mackenzie global survey the refineries in Hungary and in Slovakia are the most efficient refineries in Europe. MOL operates over 1000 filling stations in Central and South Eastern Europe and is involved in the petrochemical business as well. At the end of 2008 MOL had 352.3 MM boe proved and probable hydrocarbon reserves and 86.3 M boe/day hydrocarbon production. The Group operates over 5,000 km high pressure natural gas pipeline network in Hungary and is also a key player in the regional transit transmission operations. Due to growth in gas consumption in the EU countries and the high level of import dependency, MOL focuses on the diversification of gas source and the development of infrastructure. MOL builds strategic underground gas storage, extends its import capacity and initiated regional interconnections (New European Transmission System – NETS) offering opportunities for regional expansion. On an international level, MOL has continued to participate in and support several infrastructure development projects (Nabucco) to diversify supply.

52MOL and OMV join Dana Gas and Crescent in Kurdistan Region of Iraq

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