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UAE’s Dana Gas still in talks with Iraq for Kurdish gas

The UAE’s Dana Gas, which is expanding its gas activities in Iraq’s semi-autonomous Kurdish region, is still in talks with Baghdad and other potential buyers for a gas sales agreement for its second train as Baghdad seeks to lower reliance on Iranian energy imports.

Dana Gas, which is part of the Pearl Consortium expanding the Khor Mor gas field in the Kurdish region, is in talks with other parties, including Turkish and Kurdish buyers, for a sales gas agreement for the second phase of the expansion, which amounts to 250 MMcf/d, CEO Patrick Allman-Ward said May 9 on a call with journalists. He mentioned the talks in February.

“We are of course looking to sign a sales gas agreement for the second train, the KM 500 and we continue to engage with relevant counterparties both Turkish and the federal government and actually also locally in Kurdistan region itself as well,” Allman-Ward said.

The Pearl consortium is also in talks with the US government’s Development Finance Corp. to get a $250 million loan to help finance the Khor Mor expansion project, which will include two phases of 250 MMcf/d that will more than double the asset’s production to around 940 MMcf/d of gas from around 440 MMcf/d now, the CEO said. The first 250 MMcf/d train is expected to cost $600 million and to start production in April 2023.

Dana Gas is “making progress” on the loan and hopes to conclude talks by mid-year, Allman-Ward said.

Federal Iraq imports gas and electricity from neighboring Iran because most of its gas is pumped with oil, which is subject to OPEC + output restrictions. The federal government’s associated gas is also mostly burned, making Iraq the world’s second worst gas flaring nation after Russia in 2020, according to the World Bank.

Iranian imports

Since 2018, Iraq has been receiving waivers from the US government to continue importing Iranian gas and electricity because Tehran’s energy sector is under sanctions re-imposed by the administration of former President Donald Trump that year.

However, the US is cranking up the pressure on Baghdad to wean itself of Iranian energy imports, which help avert power shortages that have led to deadly protests in the past. Last year, Iran reduced its gas exports to Iraq, claiming Baghdad failed to pay its bills, estimated in the billions of dollars.

Abu Dhabi-listed Dana Gas has a 35% stake in the Pearl Consortium, which mainly produces gas and associated liquids from the Khor Mor and Chemchemal fields in the Kurdish region alongside the UAE’s Crescent Petroleum, Austria’s OMV, Hungary’s MOL and German’s RWE.

Dana Gas expects the Kurdistan Regional Government, which had in the past delayed payments to international oil companies due to low oil prices, to settle its arrears by the third quarter of 2021, Allman-Ward said.

Dana Gas’ Q1 production from the Kurdish region rose 9% year-on-year to 35,300 boe/d, helping to boost company output to 64,900 boe/d, a 2% increase from the year-earlier period.

Higher production from the Kurdish region helped Dana Gas’ Q1 net profit to surge 41% year-on-year to $24 million.
Source: Platts

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