The Disputes Between Dana Gas and the KRG

By Harem Karem & Aland Mahwy:dana gas

In a letter to the Abu Dhabi Bourse on 22 October 2013 (as required under the freedom of information law), Hamid Jafar, of Dana Gas and a former advisor to the Kurdistan Regional Government (KRG), revealed that he had filed a court case in London demanding $430 million from the KRG. This claim was refuted vehemently by the KRG’s natural resources minister (MNR) Ashty Hawramy, in a letter to a member of the Kurdistan Parliament, stating: “Not only the KRG does not owe Dana Gas the $430 million, but also Dana Gas owes the KRG more than the amount claimed for failing to fulfil its legal obligations – failing to clean up its hazardous waste products – which later has been cleaned up by the KRG.”

Dana Gas is one of the largest energy companies operating in the Kurdistan region and wider Middle East, with around 300,000 shareholders from 100 countries. It has offices in Saudi Arabia, Egypt, United Kingdom and Iraq.

in a public statement earlier this month, Dana claimed that on 2 July 2015 it had “obtained a favourable ruling” at the London Court of International Arbitration over its dispute with the KRG which has awarded Dana Gas $1.943 billion and exclusive long-term rights to develop and produce gas and other petroleum products at the Khor Mor and Chemchemal fields for at least 25 years. Following this announcement, Dana’s shares rose by 13.7%, the highest level in seven months.

in response, the KRG’s NRM released a statement dismissing this claim: “Dana’s public statement is highly misleading to the market and creates an impression that is both inaccurate and incomplete”. The NRM appears to be firmly maintaining its position over Dana’s claim for compensation for damages.

Where did it all start?

The dispute between Dana and the NRM began in 2009 following Dana’s attempt to farm out 20% shares to international players, MoL and OMV. KRG officials were accused by Dana gas officials of corruptly demanding bribes and creating obstacles to ongoing developments in Khor Mor and of not allowing Dana Gas to develop Chemchemal. Instead, they claimed, KRG officials maintained a suborning attitude along with huge ego display – and this has arguably cost the Kurdish public over seven billion dollars in expenditure on fuel imports. Furthermore, paying up to $3 billion annually on fuel imports is no longer sustainable, due to the KRG’s budget deficit, and the current fuel shortages and limited hours of electricity from the national grid are symptoms of an ongoing problem that originates from a bad decision in 2009. This has also had a significant negative impact on the economy.

Had the KRG not blocked the development six years ago, the energy consortium operating those two fields would now be meeting all the KR’s gas requirements for power generation as well as exporting to Turkey. It is also believed that, were it not for this decision, the original Nabucco pipeline project would have been secured: the KRG could produce 15bcm gas, allowing Nabucco to reach the required-to-operate 50bcm, which would have satisfied 10-20% of EU demand – and so the KRG could by now have become economically independent.

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