13 October 2008
The managing director of the National Iranian Gas Company has denied a report that Iran has signed a new deal with Crescent Petroleum but said talks will continue.

After an earlier report raised questions over the possibility of Iran entering a new gas deal with the United Arab Emirates (UAE), Seyyed Reza Kassaeizadeh issued an official denial on the matter.

Crescent of the UAE and the National Iranian Oil Company (NIOC) signed a gas deal in April 2001 to transport natural gas through a 90-mile pipeline from the Salman field to Lavan Island in the Persian Gulf.

The original agreement envisaged a contract of 25 years starting in 2005, under which Iran would be required to export 195 million cubic feet of natural gas to the Persian Gulf state in 2005-2006.

Under the proposed agreement, Iran will export 230 million cubic feet, 300 million cubic feet and 350 million cubic feet in the three years following 2006.

Iran's state auditors, however, said the country could lose as much as $21 billion under the proposed agreement should gas prices increase.

"Unless the content of the contract serves Iran's national interests, the country would not sign any new deal with the company," Mehr news agency quoted Kassaeizadeh as saying on Saturday.

The Iranian official urged Crescent to continue negotiations on the issue, saying that there are other potential buyers in the UAE, who have expressed interest in clinching a deal on Iranian gas.

Persian Gulf countries experienced sharp economic growth as oil prices climbed.

The UAE in particular has developed into a real-estate and industrial powerhouse.

The UAE is the Organization of Petroleum Exporting Countries' fourth-largest oil producer. But it has become increasingly dependent on natural gas to fuel new power plants and desalination plants, and to provide feedstock for new industries.

The country is struggling to secure new supplies, both domestic and overseas.

"Natural gas is a fuel of choice for clean and efficient power generation in the UAE," said Majid Jafar, Crescent's executive director.

The UAE isn't the only littoral state looking for Iranian gas. In a report released last week, Moody's Investors Service said fuel supply and resulting power shortages were the biggest risks to long-term growth in the Persian Gulf region.

As part of the deal, another Sharjah-based company, Dana Gas PJSC, seeks to transport and process the Iranian gas.

A proposed joint venture between the two Sharjah companies will also market the gas.

Iran's Oil Minister on the side lines of the Second Iran Gas Export Conference in Tehran said the Crescent gas deal is not lucrative and doesn't serve the country's interest. Gholamhossein Nozari added that the country will only sign the deal once when the price is right.

President Mahmoud Ahmadinejad likewise said that the contract to sell gas to Crescent Petroleum was based on an unacceptably low price and that the deal had been tarnished by corruption. He made the remarks in a news conference last week.

"This contract was struck based on an incorrect relationship between some politicians at a very low price," Ahmadinejad told reporters.

"The government will not allow even one penny belonging to this nation to be wasted," the president added.

The deal became controversial in Iran after some politicians said the export price should be higher. This is because the price in the contract was just 20 percent of that on Iranian gas exports to Turkey.

Head of Majlis Energy Commission also said it will publish its report on the deal soon.

Hamid Reza Katouzian told IRNA the commission has discussed the issue with the government officials and that there are ambiguities in the contract that need to be addressed first.

© Iran Daily 2008