October 08, 2021
An international arbitration tribunal has awarded Sharjah-based Dana Gas $607.5 million as compensation for damages by the National Iranian Oil Company (NIOC).
The dispute concerns a 25-year gas sales and purchase contract between Dana Gas affiliate Crescent Petroleum and the NIOC, Dana Gas said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded.
The project was due to begin in December 2005. However, the NIOC never delivered on its commitments. President Ahmadi-nejad suspended the contract shortly after he took office that year.
“This first arbitration is now concluded and covers the period of the first eight and a half years of the 25-year gas sales agreement from 2005 to 2014,” Dana Gas said.
“The news definitely comes as a positive surprise, given that the market typically discounts any possibility of an award from this case,” EFG Hermes analysts Ahmed Hazem Maher and Alaa Saleh Aly said. “Collection is now key.”
A second arbitration with a “much larger claim” for the remaining 16-1/2-year period of the contract from 2014 to 2030 is still under way, but will almost certainly take the total amount NIOC is ordered to pay well beyond a billion dollars.
The final hearing in the case is scheduled for October 2022 in Paris. A final award on the damages is expected to be announced in 2023, the company said.
The contract called for Iran to supply gas from its Salman field to Crescent for 25 years via a pipeline under the Persian Gulf. But the Ahmadi-nejad Administration said the price was too low and charged that the Khatami Administration officials who signed the contract were corrupt. The gas in question has not been sold to anyone but flared off ever since, meaning Iran got no revenue whatsoever from it. Dana Gas began legal proceedings against Iran in 2009.
No one has yet been convicted of corruption in the case.
Dana Gas is the Middle East’s largest private natural gas company.
