UAE's Dana Gas to go ahead with Kurdistan project

By Amena Bakr

SHARJAH, United Arab Emirates, May 31 (Reuters) - UAE's Dana Gas DANA.AD will go ahead with its project in Iraq's Kurdistan region despite the federal government's rejection of the deal, a Dana Gas source told Reuters on Sunday.

This month the UAE's Crescent Petroleum and affiliate Dana Gas formed a consortium with Austria's OMV (OMVV.VI) and Hungary's MOL MOLB.BU to pump enough gas from Iraq's Kurdistan region to kick-start the Nabucco pipeline to Europe via Turkey.

Shortly following the announcement, the Iraqi federal government rejected the deal signed by the Kurdish Regional Government (KRG), creating a potential hurdle for the project.

"These are all inner conflicts and we have nothing to do with them," said a source from Dana Gas who spoke to Reuters under condition of anonymity on the sidelines of a conference in the emirate of Sharjah.

"From a legal stand, our contact is one hundred percent valid ...what is happening between the Kurdish government and the federal government is a conflict we have no part in," the source added.

In the past the Iraqi oil ministry has criticised oil and gas contracts that the Kurdistan government has signed with international oil companies, calling them illegal.[ID:nLI484521]

The Western-backed Nabucco pipeline aims to lessen Europe's dependence on Russian gas. Until now, the $10 billion pipeline project had plenty of willing buyers in Europe but little gas to sell.

OMV will pay $350 million to Crescent and Dana for a 10 percent stake in their Kurdistan operating unit Pearl Petroleum. Before the deal, Crescent and Dana each held 50 percent in Pearl.

MOL will give 3 percent of its shares each to Crescent and Dana. In return, MOL will also take 10 percent in Pearl.

This month Badr Jafar, executive director for Crescent Petroleum, told Reuters that the assets in the region have the potential to produce over 3 billion cubic feet per day (cfd) by 2014. (Editing by Thomas Atkins and Erica Billingham)