The UAE Gas Project involved the purchase by Crescent Petroleum of 600 MMscf/d imported sour gas sourced from the National Iranian Oil Company (NIOC) for transportation, processing, and sale in the UAE. Gas was to be received at the offshore riser platform, connected to the Mubarak oil field infrastructure then transported via a 30-inch pipeline to the SajGas processing plant in Sharjah. At SajGas, the gas was to be sweetened to remove the sulphur content and to extract the natural gas liquids (condensate) for sale within the UAE. Both the offshore riser platform and pipeline are owned by the United Gas Transmission Company, which is wholly owned by Dana Gas, as is the SajGas processing plant.
CNGCL (in which Dana Gas owns a 35% equity share) is the gas marketing company set up to sell gas domestically within the UAE and market the liquids and sulphur products to regional and international customers. However, gas was never supplied by NIOC when the project was scheduled to start in 2005. Accordingly, the gas sales and purchase contract between Dana Gas’ partner, Crescent Petroleum, and NIOC has been the subject of international arbitration since June 2009. In 2014, the arbitration tribunal ruled in favour of Crescent Petroleum, finding NIOC to be in breach of contract and liable for damages.
As a result, a hearing was held in October 2017 to determine the amount of damages payable by NIOC for the breach of contract during the period from 2005 to mid-2014.
The final award for the first arbitration (First Award) was made against NIOC by the international arbitration tribunal in September 2021, and Dana Gas recognized the damages sum of US$607.5 million as Current Receivables on its Statement of Financial Position. This first arbitration covered the period of the first 8.5 years of the 25 year gas sales agreement from 2005 to 2014.
The Company has been updated by Crescent Petroleum regarding the various enforcement proceedings underway to enforce the First Award as follows:
All of NIOC’s challenges to the First Award have now been dismissed by the English High Court in London, and the Award has been confirmed by courts in the United Arab Emirates, the United Kingdom and in the Netherlands, with various enforcement procedures underway, including the attachment of NIOC’s assets. Confirmation proceedings are also underway in other jurisdictions including the United States and Greece.
As per the First Award, interest continues to accrue at the rate of 12-month EIBOR + 1 percentage point, compounding annually, commencing from three (3) months from the date of the First Award until date of payment. Accordingly, Dana Gas’s portion of such interest as of 31st December 2024 is $109 million.
In addition, a second arbitration with a much larger claim for the 16.5 years remainder of the contract from 2014 to 2030 is currently underway. The final hearing in the second arbitration was scheduled in 2026 and a final award of damages in relation to the second arbitration anticipated within 12 months. Crescent Petroleum and Dana Gas remain confident of a favourable outcome in the second award.
MENA's largest independently listed, natural gas-focused E&P Company
