Iran and the UAE Sign $2Bln Gas Deal

Iran and the United Arab Emirates' Crescent Petroleum signed a $2 billion deal to export natural gas from Iran's Salman field to the Persian Gulf country.

The Wall Street Journal reported that the two sides signed the 25 year, $2 billion natural gas deal on Friday.

The agreed price of $5 per million British thermal units of natural gas is reportedly four times the price Crescent pays for gas from Qatar, and more than five times the average weighted price for gas in the Middle East and North Africa.

Despite a recent decline in world oil prices, gas prices in the Persian Gulf states, particularly the United Arab Emirates, are on the rise. With the number of factories soaring and energy consumption following suit, the demand for natural gas is growing in the country.

The UAE is the fourth largest oil producer in the Organization of Petroleum Exporting Countries but it is in need of clean energy imports to fuel its rapid industrial growth.

"Natural gas is a fuel of choice for clean and efficient power generation," said Majid Jafar, Crescent's executive director.

The original agreement between Iran and Crescent, a shareholder in the United Arab Emirates energy firm, Dana Gas, was signed in 2001.

Technical problems and the failure to agree on a gas price led to extensive delays in negotiations. Following domestic debate in 2006, Iran argued for an increase to the proposed gas price in the agreement, citing a sharp rise in international gas prices from the time the original contract was agreed.

Iran, which has the world's second largest natural gas reserve after Russia, has spent around $1.5 billion on the Crescent project to date, and the country has built a 174-mile undersea pipeline linking Iran's Salman offshore gas field to Crescent's gas-processing facilities in Sharjah.

Iran, which sits on the world's second largest reserves of both oil and gas, is facing US sanctions over its civilian nuclear program.

Iranian officials have dismissed US sanctions as inefficient, saying that they are finding Asian partners instead. Several Chinese and other Asian firms are negotiating or signing up to oil and gas deals.

Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in Iran, which is rich in oil and gas, but not getting into big deals that could endanger their interests in the US.

Yet, after oil giants in the West witnessed that their absence in big deals has provided Chinese, Indian and Russian companies with excellent opportunities to signing up to an increasing number of energy projects and earn billions of dollars, many western firms are slowly losing reluctance to invest or expand work in Iran.

Some European countries have also recently voiced interest in investment in Iran's energy sector after a gas deal was signed between Iran and Switzerland regardless of US sanctions.

The National Iranian Gas Export Company and Switzerland's Elektrizitaetsgesellschaft Laufenburg signed a 25-year deal in March for the delivery of 5.5 billion cubic meters of gas per year.

The biggest recent deal, worth €100m ($147m, £80m), was signed by Steiner Prematechnik Gastec, the German engineering company, this month to build equipment for three gas conversion plants in Iran. This is at a time when France's Total, Royal/Dutch Shell and Norway's Statoil have put on hold their shares in multi-billion dollar contracts.

Washington and its Western allies accuse Iran of trying to develop nuclear weapons under the cover of a civilian nuclear program. Iran denies the charges and insists that its nuclear program is for peaceful purposes only.

Tehran stresses that the country has always pursued a civilian path to provide power to the growing number of Iranian population, whose fossil fuel would eventually run dry.

US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/