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UAE's Dana Gas CEO says Iraq's federal government interested in its Kurdish gas

Highlights

Dana, part of Pearl consortium, adding 500 MMcf/d by 2025 in Iraqi region

Baghdad interested in the 250 MMcf/d second phase of Khor Mor expansion

Federal Iraq under US pressure to stop Iranian gas, electricity imports

Dubai — Iraq's federal government is interested in acquiring natural gas from an expansion project in the semi-autonomous Kurdish region in the north that is being carried out by a consortium including the UAE's Dana Gas as Baghdad seeks to lower dependence on Iranian energy imports.

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Dana Gas, which is part of the Pearl Consortium expanding the Khor Mor gas fields in the Kurdish region, is in talks with several parties, including a Turkish buyer, for a sales gas agreement for the second phase of the expansion, which amounts to 250 MMcf/d, Dana Gas CEO Patrick Allman-Ward said Feb. 11 on a call with journalists.

"For the second train, we are in discussions with a number of different parties," Allman-Ward said. "They [the Iraqi federal government] have expressed interest and I have every confidence we will be responding to that interest."

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 by the beginning of 2025 from around 440 MMcf/d now, the CEO said. The first train is expected to start production in Q1 2023 and the second train 18 months later, he added.

"This loan has bipartisan support from both sides of the aisle in the US because they want of course to increase the amount of gas production in Iraq and thereby reduce reliance of Iraq on Iranian gas imports," Allman-Ward said. "We hope to see confirmation of that in the next months or so."

US waivers

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 2019, according to the World Bank.

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.

KRG arrears

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 Germany's RWE.

Last year, Dana Gas' Kurdish production grew 2% reaching 32,250 boe/d.

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 due to the recent price gains in Brent.

"We do have overdue receivables in the Kurdistan region of Iraq," Allman-Ward said. "The government has, however, written to us and given us a formula for how those arrears will be recovered. It is linked to the Brent price and we believe at the current sort of levels of Brent at the sort of $55/b we will be able to recover the full amount of those arrears during the course of 2021."