The Kurdistan Regional Government (KRG) will immediately pay $1 billion to the Pearl Consortium, including Dana Gas, and its partners to settle a long-running legal dispute.

In a joint press release, the Kurdistan Regional Government and Pearl Consortium announced the “full and final settlement” between the two parties.

Below is the full press release:

Settlement Agreement between Kurdistan Regional Government of Iraq (the “KRG”) and (i) Dana Gas PJSC; (ii) Crescent Petroleum Company International Limited; and (iii) Pearl Petroleum Company Limited (“Pearl”); together (the “Consortium”)

The KRG and the Consortium, together (the “Parties”), signed a Heads of Agreement onc and Chemchemal fields on 4 April 2007 (the “HoA”). Subsequently a dispute arose between them concerning certain matters under the HoA, and they referred this disputeon 21 October 2013 to an arbitration under LCIA case reference number 132527 (the “Arbitration”) for decision by an arbitral tribunal (the “Tribunal”) in London.

The Parties have mutually agreed to fully and finally settle all their differences amicably by terminating the Arbitration and related court proceedings, and releasing all remaining claims between them, including the substantial damages asserted by the Consortium against the KRG; implementing a mechanism for settlement of $2,239 million awarded by the Tribunal to date ; and proceeding with immediate further development of the HoA’s world class resources for mutual benefit as well as the benefit of the people of the Kurdistan Region and all of Iraq.

The agreed settlement highlights are as follows:

  • The KRG will immediately pay Pearl a sum of US$600 million.
  • The KRG will also immediately pay Pearl a further US$400 million to be dedicated for investment exclusively for the aforesaid further development to substantially increase production.
  • Pearl will increase gas production at Khor Mor by 500 MMscf/day, a 160% increase on the current level of production (the “Additional Gas”). The Additional Gas, together with significant additional amounts of condensate, is expected to begin production in approximately two years.
  • The balance of sums awarded by the Tribunal ($1,239 million) is no longer a debt owed by the KRG and will be reclassified as outstanding cost recoverable by Pearl from future revenues generated from the HoA areas.
  • The profit share allocated to Pearl from future revenues generated from the HoA areas are adjusted upwards to a level similar to the overall profit levels normally offered to IOCs under the KRG’s Production Sharing Contracts. This adjustment reflects the larger investment risks and costs involved in the development of natural gas resources compared to oil developments. After the recovery of costs and a return on investment by the Consortium, 78% of revenues generated from the HoA areas will be for the account of the KRG, and 22% for the account of Pearl.
  • The Parties have clarified the Khor Mor block boundary coordinates and the KRG has awarded the Consortium investment opportunities in the adjacent blocks 19 and 20, and added these to the HoA areas, with commitments by the Consortium to make appraisal investments on these blocks, and developments if commercial oil and gas resources are found.
  • The KRG will purchase 50% of the Additional Gas on agreed terms to boost the gas supply to power generation plants in the Kurdistan Region. The other 50% of the Additional Gas (250 mmscf/d) will be marketed and sold by Pearl to customers within Iraq or by export, or can be sold to the KRG as well to further boost power generation within Iraq.
  • Pearl will also expand its local training and employment programs towards achieving maximum localization and content, as well as supporting local communities through its active Corporate Social Responsibility (CSR) programmes.
  • The Parties have exchanged mutual releases, waivers, and discharges in relation to all claims in relation to the Arbitration and related court proceedings.
  • The Parties have also amended and clarified the HoA language and terms, including extension of the term of the contract until 2049.

The Parties are very pleased with their settlement and and look forward to working together to maximise the full potential of the HoA areas, for their mutual benefit as well as that of the people of the Kurdistan Region and all of Iraq.

Under the settlement, the people of the Kurdistan Region and Iraq will enjoy additional revenues and improved electricity supply. The Parties believe that this settlement agreement confirms to international investors that the Kurdistan Region of Iraq offers an attractive and secure environment for investment.

H.E. Dr. Ashti Hawrami, Minister of Natural Resources of the KRG, said:

“The companies’ investment and production to date has already delivered substantial benefits for the Kurdistan Region through enabling cost-effective power generation. We are delighted by the outcome of this settlement which opens a new chapter in the relationship between the parties and will take the development of the important natural gas sector to new heights.”

Mr. Majid Jafar, CEO of Crescent Petroleum and Managing Director of the Board of Dana Gas PJSC, added:

“We have always expressed our commitment to amicable resolution of matters to enable proper development of the Khor Mor and Chemchemal fields. We are pleased with this definitive agreement which follows constructive dialogue with the KRG and promises to generate significant value for all concerned. The settlement of all debts and restoration of full cooperation gives a positive outlook for further investment and full realization of the enormous resource potential of the HoA areas.”

(Sources: KRG, Dana Gas)

The Kurdistan Regional Government (KRG) issued a statement regarding the partial ruling on the allocation of costs from the tribunal in the ongoing arbitration between the KRG and Dana Gas PJSC, Crescent Petroleum Company International Limited and Pearl Petroleum Company Limited (collectively “the Claimants”):

The arbitration is subject to duties of confidentiality under the applicable law and arbitration rules. Without waiving these duties of confidentiality, the KRG is obliged to correct certain public statements by Dana Gas, which quote selectively from the ruling and create an impression that is materially misleading and incomplete. In particular, the Claimants’ public statement fails to mention that:

  1. The tribunal’s ruling is only a partial ruling on some costs issues in the arbitration and is not a final determination on all costs issues (or all the other remaining issues) in the arbitration.
  2. The tribunal reduced the legal costs the Claimants had claimed by millions of dollars to reflect the “success of the KRG” in defeating the Claimants’ claim for payments for excess gas, which the Claimants had valued at over US$1.3 billion.  The tribunal held that these claims, on which the KRG succeeded in full, were “in economic terms of considerable importance.”  The Tribunal also held that the discount on their costs offered by the Claimants was “inadequate to reflect the success of the KRG on the excess gas issue.”
  3. The tribunal disallowed further significant legal costs the Claimants had claimed.  The tribunal held that the Claimants had failed to discharge their burden of showing that these costs were properly recoverable.
  4. The tribunal rejected the Claimants’ position that they should be entitled to recover 100% of the fees and costs of the LCIA and the tribunal and, again, reduced the amount awarded to the Claimants to reflect the relative success of the KRG.

The KRG regrets that, once again, the Claimants have sought to make media statements that are selective, misleading and designed to harm the KRG.  The KRG hopes that, going forward, rather than disseminating misleading information in the media for their own purposes, the Claimants will focus their energies on working together with the Government and People of the Kurdistan Region in the best interests of all concerned.

(Source: KRG)

By John Lee.

UAE-based Dana Gas has said it had won a judgment against the Kurdistan Regional Government (KRG) at the London Court of International Arbitration (LCIA).

The consortium of Dana Gas, Crescent Petroleum and Pearl Petroleum has been seeking to confirm its contract rights and obtain payment from the KRG for gas production.

The company said the court has now ordered the KRG to pay $121 million for condensate and LPG.

A statement from the KRG’s Ministry of Natural Resources (MNR) said the tribunal rejected Dana’s claim for over $1.7 billion in respect of so-called excess gas, and its claim that the consortium had lost some $3.3 billion in respect of earn out payments.

More information:

Dana Gas statement

KRG statement (1)

KRG statement (2)

(Sources: Dana Gas, KRG, Reuters)

By John Lee.

UAE-based Dana Gas has announced that it has reached an “amicable and mutually beneficial settlement agreement” with RWE’s trading unit RWE Suppy & Trading GmbH (RWEST) to resolve a dispute over its operations in Iraqi Kurdistan.

The detailed terms of the settlement agreement are to be treated in accordance with the confidentiality provisions of the arbitration dispute resolution rules.

As part of the settlement, RWEST Middle East has also joined the Pearl Petroleum consortium as a full partner for 10 percent.

Dana Gas has said that it and its consortium partners are committed to working together with the KRG in order to realise the full potential of the significant resources in the Khor Mor and Chemchemal fields for the benefit of the Kurdistan Region and Iraq, as well as the wider region.

(Source: Dana Gas)

By John Lee.

Dana Gas has announced that the London Court of International Arbitration (LCIA) has ordered the Kurdistan Regional Government (KRG) to pay $1.98 billion to a consortium that it leads.

In a statement to the Abu Dhabi stock exchange, the Sharjah-based company claims that the judgement is final, binding and internationally enforceable, and that payment must be made within 28 days.

The claims relate to payment for production at the Khor Mor and Chemchamal gas fields.

Meanwhile, the KRG has hit back, pointing out that the court has yet to hear its counterclaims, provisionally quantified by the KRG’s experts at more than $3 billion, and accusing the consortium of creating “an impression that is materially misleading and incomplete”.

Shares in Dana Gas have risen 17 percent, on heavy volume, since the announcement.

(Sources: Dana Gas, KRG, Reuters, BasNews)

The UK’s High Court has ordered the Kurdistan Regional Government (KRG) to pay a consortium led by Dana Gas $100 million within 14 days.

In a statement, the KRG’s Ministry of Natural Resources said:

“The Court’s decision does not relate to the substantive merits of the claims and counterclaims in the on-going arbitration between the KRG and Dana Gas PJSC, Crescent Petroleum Company International Limited and Pearl Petroleum Company Limited (collectively, “the Claimants”).

“The order relates to an interim payment of $100 million decided by the Tribunal last year on a provisional and reversible basis, because of the purportedly precarious financial condition of Dana.”

BasNews reports that the consortium, which consists of the UAE’s Crescent Petroleum, Austria’s OMV and Hungary’s MOL alongside Dana Gas, first sought payment for production in October 2013, and the subsequent disputes are a result of non-payment.

The KRG statement accuses the consortium of failing to try to reach an agreement: “

“The KRG feels that this further escalation was unnecessary and could have been avoided. Dana was fully aware of KRG’s financial difficulties and its need to maintain its effective fight against ISIS terrorism and support for the more than 1.8 million refugees and internally displaced persons in the Kurdistan Region.

“Regrettably, rather than working constructively with the KRG to find a way forward in the light of the prevailing circumstances as other International Oil Companies have done, Dana maintained its aggressive stance and pursued its application to the Court.”

(Source: Dana Gas, KRG, BasNews)

(Picture: Dana Gas facility in Iraqi Kurdistan)

By John Lee.

The Kurdistan Regional Government (KRG) has reacted angrily to a statement from Sharjah-based Dana Gas.

Shares in the company jumped 13.7 percent on the Abu-Dhabi stock exchange on Sunday after the company won a ruling in the London Court of International Arbitration (LCIA) in its long-running dispute with the KRG in Iraq over payment arrears of $2 billion [2.4 trillion Iraqi dinars].

The company said in a statement:

“The Tribunal’s Award confirms:

  • the Consortium’s [Dana Gas, Crescent Petroleum and Pearl Petroleum] 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.”

But in a response, the KRG’s Ministry of Natural Resources said that Dana has misled investors, and that “Dana’s public statements about the partial award are inaccurate and/or incomplete in numerous material respects, ” addng:

“The KRG has incurred significant damages as a result of the failure of Dana and its principals to honor their obligations, and will continue vigorously to pursue its claims for damages and other relief against both Dana and its principals in all appropriate fora.”

The full statement from Dana Gas can be read here, while the KRG’s response can be read here.

(Sources: Dana Gas, KRG, BasNews)

(Picture: Dana Gas operation in Iraqi Kurdistan)

By John Lee.

The Kurdistan Regional Government (KRG) has reacted angrily to a statement from Sharjah-based Dana Gas.

Shares in the company jumped 13.7 percent on the Abu-Dhabi stock exchange on Sunday after the company won a ruling in the London Court of International Arbitration (LCIA) in its long-running dispute with the KRG in Iraq over payment arrears of $2 billion [2.4 trillion Iraqi dinars].

The company said in a statement:

“The Tribunal’s Award confirms:

  • the Consortium’s [Dana Gas, Crescent Petroleum and Pearl Petroleum] 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.”

But in a response, the KRG’s Ministry of Natural Resources said that Dana has misled investors, and that “Dana’s public statements about the partial award are inaccurate and/or incomplete in numerous material respects, ” addng:

“The KRG has incurred significant damages as a result of the failure of Dana and its principals to honor their obligations, and will continue vigorously to pursue its claims for damages and other relief against both Dana and its principals in all appropriate fora.”

The full statement from Dana Gas can be read here, while the KRG’s response can be read here.

(Sources: Dana Gas, KRG, BasNews)

(Picture: Dana Gas operation in Iraqi Kurdistan)

By John Lee.

Sharjah-based Dana Gas and its consortium partners, Crescent Petroleum and Pearl Petroleum, is pursuing $100 million (117 billion Iraqi dinars) in payments from the Kurdistan Regional Government (KRG).

In a statement to the Abu Dhabi Securities Exchange (ADX), the company said:

“The LCIA [London Court of International Arbitration] Tribunal recently ordered the KRG to pay the Consortium US$100 million within a timeframe of 30 days by way of a second interim order.

“In default of its legal obligations, the KRG failed to make payment by the stipulated deadline of 17th November 2014 and as a
consequence, the Tribunal’s order became peremptory in nature, enabling its enforcement by the English Court.

“With the Tribunal’s permission, on 12th December 2014, an application to the English Court has been made for enforcement of the order, with the prospect of sanctions being imposed on the KRG for non-compliance.”

But the company said that despite this, and a further multi-billion-dollar claim for breach of contract, which is due to be heard in April of next year, it remains committed to working in the Kurdistan and Iraq, adding:

“[We] sincerely hope that all outstanding contractual matters with the KRG be resolved, amicably and in good faith in the shortest possible time, within the contractual framework”.

“This will in turn enable the full and proper development of the Khor Mor and Chemchemal fields as envisaged by the Contract, for the benefit of the people of the Kurdistan region and all of Iraq.”

(Source: Dana Gas)

(Picture: Dana Gas operations in Iraqi Kurdistan)

By John Lee.

The Kurdistan Regional Government (KRG) has rejected a statement by Abu Dhabi-listed Dana Gas to the effect that the London Court of International Arbitration had awarded the company the right to receive some outstanding payments from the Kurdish government.

Dana Gas said on Sunday that its consortium with Crescent Petroleum and Pearl Petroleum had been successful in its application for interim measures, and that an order had been made for the KRG to restore the previous regular payments to the companies as of 21st March 2014, the date of the application, and until the case is concluded.

However, the KRG said on Wednesday that Dana Gas’s statement was “inaccurate and misleading”. Denying that any sums were outstanding to Dana, it added:

“Dana Gas has made public the Tribunal’s ruling regarding interim payments but has mischaracterised that ruling.

The KRG said it will continue vigorously to pursue its claims against Dana Gas.

(Sources: KRG, Dana Gas)

(Picture: Dana Gas operations in Iraqi Kurdistan)