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O R 250955Z FEB 10
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TO RUEHC/SECSTATE WASHDC IMMEDIATE 0088
INFO GULF COOPERATION COUNCIL COLLECTIVE
IRAN COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0001

C O N F I D E N T I A L DUBAI 000027 
 
SIPDIS 
DEPARTMENT FOR NEA/FO SCHLICHER, LIMBERT 
NEA/IR BURNS 
 
E.O. 12958: DECL: 2020/02/25 
TAGS: EPET ENRG PREL ETTC IR IZ AE
SUBJECT: Iranian Gas Deliveries to Sharjah Remain on Hold 
 
CLASSIFIED BY: Justin Siberell, Consul General, U.S. Consulate 
General, Dubai; REASON: 1.4(B), (D) 
 
¶1. (C) SUMMARY: Sharjah-based Crescent Petroleum executives tell 
Consul General that the company's project to purchase unprocessed 
sour gas from Iran's Salman gas field remains suspended pending 
Iranian completion of export facilities to deliver the gas.  But 
they believe progress is underway, due to involvement by "European" 
companies (nfi) assisting to commission the Iranian export 
facilities.  To add pressure on the National Iranian Oil Company 
(NIOC) to deliver the gas, Crescent has entered arbitration 
proceedings in The Hague to enforce its 25-year contract, signed in 
¶2001.  Meanwhile, the export deal remains a source of controversy 
in Iran, where MPs have demanded its annulment on grounds that the 
agreed price formula is disadvantageous to Iran.  End Summary. 
 
 
 
¶2. (C) Consul General met February 18 with Hamid and Majid Jafar, 
Chairman and Director General, respectively, of Crescent Petroleum, 
a Sharjah-based energy company.  Hamid Jafar is an Iraqi-born, 
30-year UAE resident who founded Crescent in the 1970's and 
maintains significant business interests in the UAE and the region, 
significantly in Egypt and the Kurdish region of Iraq through 
affiliated company Dana Gas, PJC.  CG raised Crescent Petroleum's 
2001 deal with the Iranian National Oil Company to purchase sour 
gas from Iran's Salman field in the context of increased USG 
concern over Iran's nuclear program and recent proposed legislation 
to target Iran's petroleum sector for enhanced sanctions. 
 
 
 
¶3. (C) Jafar said that Crescent continued to wait on Iranian 
completion of export facilities at the Salman field that would 
enable delivery of the gas to Crescent's offshore facility adjacent 
to Sharjah's Mubarek field.  A 30-inch diameter pipeline is in 
place to receive the Iranian gas once it is made available for 
export.  Jafar said that, "in ordinary circumstances" completion of 
work required on the Iranian side would take "three to six months," 
but Crescent had been waiting  since 2005, the original agreed-upon 
delivery date.  In frustration at the continued delays, Crescent 
initiated arbitration proceedings in 2009 against NIOC in The 
Hague, an action Jafar said was intended as a "pressure tactic" 
designed to force NIOC to complete preparations and deliver the 
gas. 
 
 
 
¶4. (C) Jafar said that Crescent had recently been encouraged by 
reported progress on the Iranian export facilities.  This was due 
to work by "French and German" companies (nfi) to commission the 
export facility at the Salman field.  However, press and oil 
journal reports indicate the deal remains controversial in Iran 
where the agreed price in the 2001 deal is viewed as well below the 
current market rate and therefore counter to Iran's national 
interest.  The pricing controversy is likely behind Iran's delays 
in completion of its technical work at the Salman field, Jafar 
said, though NIOC's project management capability has been severely 
eroded by years of isolation and internal corruption.  (Comment: 
According to press reports, and likely the result of Crescent's 
arbitration filing, Reza Kasaeizadeh, Managing Director of the 
National Iranian Gas Export Company, said in early February that 
"other conditions" must also be factored in before Iran agrees to 
deliver the gas, including "the manner of export, sale and 
delivery", comments viewed as signaling Iran's continued reluctance 
to deliver the gas. End Comment.) 
 
 
 
¶5. (C) When CG reminded Jafar of the possibility of exposure to 
sanctions measures for involvement with NIOC in the development of 
Iran's petroleum resources, he countered that purchasing Iranian 
gas was no different than lifting Iranian crude oil, which has not 
been viewed as violating U.S. Iran sanctions, at least to date.  If 
the USG began sanctioning companies for purchases of Iranian crude 
oil, as opposed to investing in or developing Iran's oil and gas 
infrastructure, then Crescent might face some exposure, he said. 
But Crescent has invested "not one dollar" in Iran's oil and gas 
infrastructure, according to Jafar; it merely has a contract to 
purchase its (untreated) gas. 
 
 
 
¶6. (C) Jafar said that Crescent has lined up three main purchasers 
for the Iranian gas if/when deliveries begin:  the Sharjah 
Electricity and Water Authority (SEWA); the UAE Federal Electricity 
and Water Authority (FEWA); and an Omani petrochemical company 
 
(nfi).  The UAE's northern emirates suffer a severe gas shortage, 
which has resulted in seasonal power shortages and stunted 
industrial development.  Apart from its domestic sources of gas, 
the UAE relies on gas supplies from Qatar by way of Abu Dhabi as 
part of the Dolphin project to supply much of its natural gas 
needs. 
 
 
 
¶7. (C) Comment:  Crescent and Sharjah continue to hold out hope on 
a deal that has eluded others previously, including Dubai in the 
1990's when it failed to conclude a deal to purchase gas from 
Iran's Sirri field.  Delivering regular supplies of gas to a 
neighboring state like the UAE might be viewed as a strategic 
decision meriting  compromise on price, but the persistent 
criticism within Iran over the deal and the failure to complete it 
reveals an essential ambivalence in Iran that can at times work 
against the achievement of strategic goals.  Abu Dhabi oil 
officials have expressed dismay to Emboffs at Sharjah's pursuit of 
a deal with the intractable Iranians for attempting to deal with a 
partner viewed as deeply unreliable.  End Comment. 
 
 
 
¶8. (C) Bio Note: Hamid Jafar retains strong links to his native 
Iraq beyond Dana Gas PJC's involvement in natural gas development 
in the Kurdish region.  He is a financial supporter of Iraqiyya 
Candidate Iyad Allawi, and took a phone call from Allawi during the 
meeting with CG. 
 
 
 
SIBERELL 
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