Dana Gas PJSC is required to keep the market updated with regard to the international arbitration case it filed in October 2013, along with Crescent Petroleum and Pearl Petroleum Company Limited (together the ‘Consortium’), before the London Court of International Arbitration (‘LCIA’). This case was filed in order to secure a mandatory arbitral declaration confirming the Consortium’s exclusive rights under its contract with the Kurdistan Regional Government of Iraq (‘KRG’), which was signed in April 2007 and is governed by English law (‘the Contract’):
On 2 July 2015, the LCIA Tribunal handed down its Partial Final Award ruling confirming beyond any doubt the Consortium’s contractual rights including a number of important issues addressed at the Arbitration Hearing which took place in London in the week of 20 April 2015.
The Tribunal’s Award confirms:
the Consortium’s exclusive long-term rights to develop and produce gas and petroleum from both the Khor Mor and Chemchemal fields for the duration of the Contract, being not less than 25 years. (These rights had previously been disputed by the KRG since May 2009, preventing the proper and timely development of the fields);
the KRG’s contractual obligation to pay the Consortium for the produced condensate and LPG at international prices, including the pricing methodology for each; and that
Dana Gas and Crescent Petroleum were entitled to farm out part of their own interests to MOL and OMV, and that the KRG was not entitled to a share of the farm-out proceeds.
The Arbitral Tribunal has also already fixed the date of 21st September 2015 to determine the Consortium’s monetary claim against the KRG for outstanding unpaid invoices for the produced condensate and LPG, now totaling US$ 1.943 Billion as of end May 2015 as per the pricing methodology determined by the Award.
The remaining claims in the arbitration, including the Consortium’s claims for wrongfully delayed development of the fields, will be heard during the next phase of the Arbitration, currently scheduled for the first quarter of 2016.
Meanwhile, the KRG still remains in default of the Arbitral Tribunal’s Peremptory Order of October 2014 to pay the Consortium US$100 Million on an interim basis. Consequently and separately, the Consortium was compelled to seek English Court enforcement of this Order, and a hearing in this regard has been fixed for 28th and 29th October 2015 in the High Court of England.
Dana Gas and its Consortium partners reiterate their continued commitment to the Contract, the Kurdistan Region and all of Iraq, and sincerely hope that the KRG will henceforth respect its unambiguous contractual obligations which have now been confirmed by the LCIA Arbitral Tribunal. This will in turn enable the full and proper development of the Khor Mor and Chemchemal fields as envisaged by the Contract which could provide all of the fuel needs for power generation in the Kurdistan Region of Iraq as well as additional volumes of gas for export. This would result in billions of dollars annually of further cost savings for the KRG, as well as revenue generation for the benefit of the people of the Kurdistan Region and all of Iraq. In the meantime Dana Gas and its Consortium partners continue to produce an average of over 84,000 barrels of oil equivalent (boe) per day, including 335 million cubic feet per day of gas that enables affordable electrical power generation in the Kurdistan Region of Iraq.
Dana Gas and its Consortium partners are proud to be the largest oil and gas sector investors and cumulative producers in the Kurdistan Region of Iraq. To date, they have invested over US$ 1.2 billion in the Kurdistan Region and have already produced over 145 million boe of natural gas and petroleum liquids over almost seven years, thereby enabling affordable electricity provision and an economic and social transformation for the Kurdistan Region and its people.