Identifier
Created
Classification
Origin
10DUBAI27
2010-02-25 09:55:00
CONFIDENTIAL
Consulate Dubai
Cable title:  

Iranian Gas Deliveries to Sharjah Remain on Hold

Tags:  EPET ENRG PREL ETTC IR IZ AE 
pdf how-to read a cable
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DE RUEHDE #0027/01 0560955
ZNY CCCCC ZZH
O R 250955Z FEB 10
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0088
INFO GULF COOPERATION COUNCIL COLLECTIVE
IRAN COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0001
C O N F I D E N T I A L DUBAI 000027 

SIPDIS
DEPARTMENT FOR NEA/FO SCHLICHER, LIMBERT
NEA/IR BURNS

E.O. 12958: DECL: 2020/02/25
TAGS: EPET ENRG PREL ETTC IR IZ AE
SUBJECT: Iranian Gas Deliveries to Sharjah Remain on Hold

CLASSIFIED BY: Justin Siberell, Consul General, U.S. Consulate
General, Dubai; REASON: 1.4(B),(D)

C O N F I D E N T I A L DUBAI 000027

SIPDIS
DEPARTMENT FOR NEA/FO SCHLICHER, LIMBERT
NEA/IR BURNS

E.O. 12958: DECL: 2020/02/25
TAGS: EPET ENRG PREL ETTC IR IZ AE
SUBJECT: Iranian Gas Deliveries to Sharjah Remain on Hold

CLASSIFIED BY: Justin Siberell, Consul General, U.S. Consulate
General, Dubai; REASON: 1.4(B),(D)


1. (C) SUMMARY: Sharjah-based Crescent Petroleum executives tell
Consul General that the company's project to purchase unprocessed
sour gas from Iran's Salman gas field remains suspended pending
Iranian completion of export facilities to deliver the gas. But
they believe progress is underway, due to involvement by "European"
companies (nfi) assisting to commission the Iranian export
facilities. To add pressure on the National Iranian Oil Company
(NIOC) to deliver the gas, Crescent has entered arbitration
proceedings in The Hague to enforce its 25-year contract, signed in

2001. Meanwhile, the export deal remains a source of controversy
in Iran, where MPs have demanded its annulment on grounds that the
agreed price formula is disadvantageous to Iran. End Summary.




2. (C) Consul General met February 18 with Hamid and Majid Jafar,
Chairman and Director General, respectively, of Crescent Petroleum,
a Sharjah-based energy company. Hamid Jafar is an Iraqi-born,
30-year UAE resident who founded Crescent in the 1970's and
maintains significant business interests in the UAE and the region,
significantly in Egypt and the Kurdish region of Iraq through
affiliated company Dana Gas, PJC. CG raised Crescent Petroleum's
2001 deal with the Iranian National Oil Company to purchase sour
gas from Iran's Salman field in the context of increased USG
concern over Iran's nuclear program and recent proposed legislation
to target Iran's petroleum sector for enhanced sanctions.




3. (C) Jafar said that Crescent continued to wait on Iranian
completion of export facilities at the Salman field that would
enable delivery of the gas to Crescent's offshore facility adjacent
to Sharjah's Mubarek field. A 30-inch diameter pipeline is in
place to receive the Iranian gas once it is made available for
export. Jafar said that, "in ordinary circumstances" completion of
work required on the Iranian side would take "three to six months,"

but Crescent had been waiting since 2005, the original agreed-upon
delivery date. In frustration at the continued delays, Crescent
initiated arbitration proceedings in 2009 against NIOC in The
Hague, an action Jafar said was intended as a "pressure tactic"
designed to force NIOC to complete preparations and deliver the
gas.




4. (C) Jafar said that Crescent had recently been encouraged by
reported progress on the Iranian export facilities. This was due
to work by "French and German" companies (nfi) to commission the
export facility at the Salman field. However, press and oil
journal reports indicate the deal remains controversial in Iran
where the agreed price in the 2001 deal is viewed as well below the
current market rate and therefore counter to Iran's national
interest. The pricing controversy is likely behind Iran's delays
in completion of its technical work at the Salman field, Jafar
said, though NIOC's project management capability has been severely
eroded by years of isolation and internal corruption. (Comment:
According to press reports, and likely the result of Crescent's
arbitration filing, Reza Kasaeizadeh, Managing Director of the
National Iranian Gas Export Company, said in early February that
"other conditions" must also be factored in before Iran agrees to
deliver the gas, including "the manner of export, sale and
delivery", comments viewed as signaling Iran's continued reluctance
to deliver the gas. End Comment.)




5. (C) When CG reminded Jafar of the possibility of exposure to
sanctions measures for involvement with NIOC in the development of
Iran's petroleum resources, he countered that purchasing Iranian
gas was no different than lifting Iranian crude oil, which has not
been viewed as violating U.S. Iran sanctions, at least to date. If
the USG began sanctioning companies for purchases of Iranian crude
oil, as opposed to investing in or developing Iran's oil and gas
infrastructure, then Crescent might face some exposure, he said.
But Crescent has invested "not one dollar" in Iran's oil and gas
infrastructure, according to Jafar; it merely has a contract to
purchase its (untreated) gas.




6. (C) Jafar said that Crescent has lined up three main purchasers
for the Iranian gas if/when deliveries begin: the Sharjah
Electricity and Water Authority (SEWA); the UAE Federal Electricity
and Water Authority (FEWA); and an Omani petrochemical company

(nfi). The UAE's northern emirates suffer a severe gas shortage,
which has resulted in seasonal power shortages and stunted
industrial development. Apart from its domestic sources of gas,
the UAE relies on gas supplies from Qatar by way of Abu Dhabi as
part of the Dolphin project to supply much of its natural gas
needs.




7. (C) Comment: Crescent and Sharjah continue to hold out hope on
a deal that has eluded others previously, including Dubai in the
1990's when it failed to conclude a deal to purchase gas from
Iran's Sirri field. Delivering regular supplies of gas to a
neighboring state like the UAE might be viewed as a strategic
decision meriting compromise on price, but the persistent
criticism within Iran over the deal and the failure to complete it
reveals an essential ambivalence in Iran that can at times work
against the achievement of strategic goals. Abu Dhabi oil
officials have expressed dismay to Emboffs at Sharjah's pursuit of
a deal with the intractable Iranians for attempting to deal with a
partner viewed as deeply unreliable. End Comment.




8. (C) Bio Note: Hamid Jafar retains strong links to his native
Iraq beyond Dana Gas PJC's involvement in natural gas development
in the Kurdish region. He is a financial supporter of Iraqiyya
Candidate Iyad Allawi, and took a phone call from Allawi during the
meeting with CG.



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