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Thu 17 Apr 2008 09:53 AM

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Iran tells UAE: Agree to price or lose gas

Tehran threatens to cut promised gas supply to UAE as price war escalates.

Iran is serious in its threat to use gas it planned to sell to Crescent Petroleum domestically if a long-running dispute with the UAE firm over price is not resolved, Iran's oil minister said on Wednesday.

Iran and privately-owned Crescent, based in Sharjah in the United Arab Emirates, have been locked in negotiations about the price of gas exports from the Iranian offshore Salman field to the UAE since 2006.

The UAE needs gas from the $1 billion project to meet rising domestic demand from industry and power plants, but the deal became controversial in Iran after some politicians said the export price should be higher.

"If the price is not corrected, the gas will not be delivered to them (Crescent)," Oil Minister Gholamhossein Nozari told a news conference.

"We are very serious and if no agreement is arrived, the gas will be transferred over to the mainland for domestic consumption," Nozari said.

Iran has previously said it would use the gas at home or sell it to others if no deal is reached. Negotiations have continued despite Iranian talk of ultimatums.

Crescent reiterated on Wednesday that the gas supply agreement signed with Iran was internationally binding.

"We are in regular discussions on prices and quantities within the framework of the contract, which is internationally binding and being respected by both parties," a Crescent spokesman said.

Iran has yet to complete building its facilities to pump gas to the UAE, while Crescent's offshore pipeline and processing facilities for the gas have long been complete.

"Iran's facilities for producing the gas are not yet complete after a delay of over two years, though they have announced that the project is in the commissioning phase and will be ready soon," the spokesman said.

Crescent in February said it had made progress on talks to resolve the dispute about pricing and volume for gas imports from Iran but had yet to reach a final agreement.

Tehran has no pipeline from the offshore Salman field back to Iran and therefore limited options for domestic use.

Crescent had expected first deliveries of the gas in mid-2006. The initial agreement was for the supply of 600 million cubic feet per day.

Crescent's affiliate Dana Gas will process and transport the gas to utilities and industrial users in the UAE. (Reuters)

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