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UAE oil firm takes spat on Iran contract to arbitration.

Crescent Petroleum of the UAE last week announced the formation of an international arbitration panel to resolve a four-year-old contract dispute with Iran.

But as soon as that announcement was made, angry Iranian lawmakers started talking about just canceling to contract entirely.

The formation of an international arbitration tribunal was announced by a spokesman from Crescent Petroleum. "The three-person arbitration tribunal, for the arbitration between Crescent Petroleum and the National Iranian Oil Company (NIOC), has now been officially formed, as per the contract procedures," he said.

According to a report in Arabianbusiness.com, Badr Jafar, executive director of Crescent Petroleum, expressed hope saying: "We always strive to maintain good relations with our contractual counterparties, but contractual commitments are just that, and business is business. We are totally confident about our contractual position. Incidentally, NIOC has never defaulted on an internationally binding contractual commitment and we don't expect that NIOC will start reneging on its deals now."

Recalling the long road of negotiations, Jafar was quoted as saying: "After four years of intensive negotiation, we signed a long-term internationally binding gas supply agreement with the NIOC in 2001. Both sides invested over $2 billion in facilities in our respective countries to prepare for this project."

Blaming the dispute on "huge delays in the upstream development in Iran," Badr said, "Gas that was due to begin delivery in December 2005 has not been supplied yet.... We had relied upon this contract and committed to our customers as a result. NIOC is now almost four years late. As a result, and because of the stress that this delay was placing on our customers, we felt we had no option but to proceed with the arbitration route to seek independent judgment on specific performance to put an end to negative public debate, and that's where we are today."

But Iranian lawmakers suggested Tehran may cancel the deal to export gas to the UAE. "In the opinion of some deputies, this contract will have to be revoked and its international ramifications accepted," said Emad Hossaini, spokesman for the Majlis Energy Committee.

New Oil Minister Massud Mir-Kazemi has yet to comment directly on the issue, while his predecessor, Gholam-Hossain Nozari, had threatened to use the gas domestically if a new agreement could not be reached on price.

The 25-year contract, which was signed in 2001, linked the price to oil with a formula that many in Iran now seem to feel is unappealing.
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Title Annotation:Energy: Keeping the world moving
Publication:Iran Times International (Washington, DC)
Date:Nov 13, 2009
Words:407
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