Iran demands 'fair' price before supplying gas to UAE

Iran will not start delivering natural gas to the UAE until the price has been "corrected" in a contract with Crescent Petroleum, Oil Minister Gholamhossein Nozari said on Saturday.

The National Iranian Oil Company (NIOC) and UAE-based Crescent agreed on a deal in 2001 to deliver natural gas from Iran's offshore Salman field to the UAE to meet the neighbouring Gulf country's growing energy demand.

But the agreement was stalled over demands by Iran for a "fair" gas price.

Asked when the issue would be resolved, Nozari told a news conference, reiterating Tehran's official line: "Not until the price issue, as the focal point of the contract, is corrected will we begin to export any gas."

He added: "After this is dealt with, we will then consider their demand for additional gas in a supplementary contract."

Earlier this month, a Crescent executive said it had incurred big financial losses due to Iran taking over three years longer than scheduled to deliver gas exports from Salman.

Majid Jafar, executive director of Crescent, said on April 15 Iran had yet to complete testing facilities at the field that should have provided Iran's first gas exports to its neighbour across the Gulf in December 2005.

Crescent was due to receive the gas from Iran and deliver it to affiliate Dana Gas for processing and transport to utilities and industrial users in the UAE.

Delays had taken the total cost of the project to both Iran and Crescent to over $2bn, double the initial estimate, Jafar said.

He said Crescent and Iranian officials agreed on a revised price formula last year after several rounds of negotiations, but that the state-run NIOC had offered no follow up on that deal.

When the deal was struck in 2001, oil prices were about a third of their current levels. As oil subsequently rallied, Iran said it wanted a higher price. (Reuters)

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