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Deal for Iraqi gas to flow to Europe

TWO European energy companies helping to build a pipeline to reduce the continent's dependence on Russian gas said yesterday that they will team with Middle Eastern producers to feed the route with Iraqi fuel.

In a consortium announced in Sharjah, United Arab Emirates, Austria's OMV AG and Hungary's MOL said they will each take a 10 percent stake in a gas production site operated by the sheikdom's Dana Gas and Crescent Petroleum.

The deal gives the European companies a share of an US$8 billion project to extract natural gas from the Khor Mor and Chemchemal fields in Iraq's northern Kurdish region.

Having a guaranteed supply source should jump-start efforts to build the 3,300-kilometer Nabucco pipeline linking Turkey to central Europe.

The fate of the pipeline has been in doubt because of concerns about adequate supplies.

"We're confident this is enough for, at minimum, a trigger source for the Nabucco project," Crescent Petroleum's executive director, Badr Jafar, said in an interview.

Vienna-based OMV will pay US$350 million for its share of the deal.

The companies said the cash would be reinvested into the project.

Crescent and Dana Gas will each take a 3 percent stake in Budapest-based MOL.

OMV and MOL each has a 16.7 percent stake in the Nabucco project, along with Bulgaria's Bulgargaz, Romania's Transgaz, Turkey's BOTAS Petroleum Pipeline Corp and Germany's RWE AG.

The pipeline aims to transport up to 1.5 billion cubic feet (42.48 million cubic meters) per day starting in 2015, with capacity eventually rising to 3 billion cubic feet of gas per day.

Jafar said Crescent and Dana Gas are currently producing 90 million cubic feet of gas daily at Khor Mor, and he expects output to rise to at least 3 billion cubic feet per day by 2014.

There are agreements with local authorities that require the domestic market receive priority in gas production contracts.


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