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Sat 7 Aug 2010 07:09 PM

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Iran cancels gas contract with UAE's Crescent

Deputy oil minister and head of NIOC claimed that the contract had been nullified.

Iran cancels gas contract with UAE's Crescent
CONTRACT CANCELLED: Iran has cancelled a gas contract with UAE based Crescent Petroleum over the supply of Iranian gas. (Getty Images)

Iran has cancelled a gas contract with UAE based Crescent Petroleum with which it has had a long standing dispute over the supply of Iranian gas, the head of the National Iranian Oil Company (NIOC) said on Saturday.

NIOC and Sharjah headquartered Crescent signed a 25 year gas contract in 2001, with a price linked to oil. But as oil rallied some Iranian officials called for a revision to the price formula and blamed the price dispute for delivery delays.

Javad Oji, head of NIOC and Iran's deputy oil minister said the contract had been nullified and that from now on: "The oil ministry's policy is the direct sale of gas to the UAE government", the semi official Mehr news agency reported.

He said: "For the sale of gas to neighbouring countries, a unified price formula has been set and all negotiations will be conducted on the basis of this formula obtained on the basis of oil and oil derivative prices."

Iran, a major crude exporter, sits on the world's second largest natural gas reserves after Russia, but sanctions that hinder access to Western technology and other factors have slowed its development as a major exporter.

Oji said gas exports in the last Iranian year, which ran to March 21, 2010, were up 44 percent year on year at $6.8 billion. Iran also earned $1.8 billion from the swap and transit of gas during the same period.

Production capacity stands at 540 million cubic metres per day, he said.

Iran had secured a permit from Turkey to transit gas through its territory and was now in negotiations to export gas to Europe, Oji said.

He described talks with prospective buyers being at "an intensified phase". He gave no further details. (Reuters)