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Sun 11 Mar 2007 03:18 PM

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Iran yet to finish UAE gas pipeline

A pipeline linking the Salman gas field with the UAE is already nine months late.

Iran has yet to finish building a platform and pipeline to link its offshore Salman gas field to the United Arab Emirates, some nine months after exports through the line were due to start, a Dana Gas executive said on Sunday.

"For technical reasons the platform and the pipeline have yet to be completed," Dana Gas External Affairs Manager Nasser Akram told Reuters.

Akram could not say when imports would begin to the UAE, which needs the gas to meet rapidly rising domestic demand.

Industry sources said that Iran would likely complete the facilities in May, and along with technical problems had also struggled with a shortage of labour. Labour shortages have dogged new energy projects worldwide, contributing to rising costs and startup delays.

Crescent Petroleum, which is a shareholder in Dana and holds the gas supply contract with Iran, had expected first deliveries in mid-2006. The pipeline and gas processing plants in UAE waters have long been complete.

An extended wrangle over the imported gas price between Iran and Crescent Oil was unlikely to end until the plant and pipeline were ready, industry sources said.

The deal became controversial in Iran last year after politicians said the country would not benefit from the exports because gas prices had risen sharply since the initial contract was signed. Iran later said it would not export to the UAE until it secured a higher price.

Last month, Iran's oil minister said it would keep the gas for domestic consumption if it does not strike a deal. Industry sources said this was an empty threat, as there is no pipeline linking Salman with Iran's domestic gas infrastructure.

Initial agreement was for supply of 600 million cubic feet per day. Dana has said the pipeline has larger capacity of a billion cfd.

Dana Gas was set up to deliver gas to utilities and industrial users in the UAE. With the agreement to import Iranian gas delayed, the company has virtually no operating income and has looked for new routes for expansion.

Dana bought Canada-based oil and gas explorer Centurion Energy International in January for $979 million, a step in its strategy to expand the scope of its operations in the Middle East and North Africa.

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