x Abu Dhabi, UAEFriday 21 July 2017

Dana Gas prepares to have Turkey seize KRG assets

Consortium recently brought arbitration claim against the KRG to clarify the amount of money they believe they are owed for work already carried out on Kurdish gasfields and on their rights to develop and market gasfields further.

A consortium led by the UAE company Dana Gas is prepared to convince a Turkish court to seize assets belonging to the Kurdistan Regional Government in Iraq and enforce an arbitration claim, according to a source with knowledge of the company’s plans.

Dana Gas and its consortium partners recently brought an arbitration claim against the KRG in London to clarify the amount of money they believe they are owed for work already carried out on Kurdish gasfields and on their rights to develop and market gasfields further.

As the KRG recently signed a multibillion dollar agreement to export oil to Turkey, Dana and its partners told creditors recently that they will keep open the option of enforcing a claim in a Turkish court to seize oil products from the Kurdish region until its receivables are met, the source said.

That eventuality may arise if the arbitration claim is awarded in favour of the consortium, but the KRG refuses to abide by the decision.

“Turkey is a signatory to the New York Convention,” the source said, referring to the convention that applies to the recognition and enforcement of foreign arbitral awards.

“So in theory if KRG refuses to play ball, Dana could get Turkey to seize any imports from Kurdistan until the terms of the arbitration are met,” he added.

There is precedent for this sort of action: most recently in 2012, the hedge fund Elliott Capital Management seized an Argentine naval ship when it was docked in Ghana over the Latin American country’s refusal to pay back a 2001 bond despite a court order.

“Yes, it can be done: I have worked on similar cases and it’s quite amazing how quickly the issue is resolved once that action is taken,” said Rob Horne, a partner at the law firm Trowers & Hamlins.

Mr Horne cautioned, however, that it may be tricky for Dana Gas and its partners to identify which assets belong to the KRG, as oil imports from the KRG into Turkey would typically be held by a joint venture company owned by Turkey and the KRG, which could complicate matters.

“In that case you would have to start a satellite litigation secondary to the main one to establish that the KRG owns this joint venture,” he said.

The company is nonetheless confident that it can enforce the claim in Turkey if the dispute is not resolved in the arbitration process, the source said.

Dana Gas refused to comment on the possibility of enforcing payments in Turkey.

“The arbitration is aimed at confirming our contractual agreement with the Kurdistan Regional Government of Iraq and protecting our shareholders’ rights and allowing us to further develop resource opportunities that lie in our two fields in Kurdistan.

“We want to protect the risk capital we have put to work and we plan to put to work in the region,” said Robinder Singh, investor relations director at Dana Gas .

“Our commitment to the region is firm. We are continuing to produce and supply natural gas, condensate and LPG into the local markets in Kurdistan, thereby providing a much-needed energy source that supports the economic development of the region. So we are ensuring that our shareholder interest in the fields is fully protected,” he added.

The Dana Gas-led consortium, called Pearl Petroleum, first signed a contract with the KRG in 2007 to develop the Khor Mor and Chemchemal fields. The consortium has since been producing gas for the KRG’s power plants.

However, payments from the regional government were delayed on occasion and eventually stopped altogether, the source said. The consortium attempted to resolve the issue through formal mediation earlier this year, but the KRG declined to engage in this process, Dana Gas said in a statement in October.

The KRG responded by stating later the same day that there were no outstanding receivables owed by the KRG to Dana or Dana’s affiliates.

“It is Dana and its affiliates that owe the KRG significant sums,” the KRG’s foreign ministry said in a statement, and added that Pearl Petroleum is “not recognised by the KRG”.

Pearl Petroleum did not respond to requests for comment. The KRG’s ministry of natural resources declined to comment.

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