The UAE's Dana Gas Has Signed Agreements with The Sharjah and Ajman Governments

The UAE's Dana Gas has signed agreements with the Sharjah and Ajman governments to develop a gas field located about 40 km offshore in shared territorial waters, the company said in a statement Thursday.

The agreements include a unitization plan for management of the shared field, gas sales and purchase contracts, and a joint operating agreement that covers drilling horizontal wells, installing an offshore platform for gas production and processing, and constructing a 25-km undersea pipeline.

Initial production is expected in the first half of 2014, Dana said.

The Sharjah-based company, which produces oil and gas from onshore fields in Egypt and Iraqi Kurdistan, said the new offshore gas development was its first exploration and production project in the Gulf Cooperation Council region.

The GCC is a coalition of Arab states in the Persian Gulf region and comprise the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman.

"The produced gas will be used mainly for power generation which will make significant savings in fuel cost," Executive Director Rashid al-Jarwan said.

Sharjah and Ajman, two of the seven emirates comprising the UAE federation, lack any significant domestic oil and gas production. They depend largely on imported diesel and fuel oil for power generation, supplemented by gas imported from Qatar and distributed at commercial rates to industrial customers by an Abu Dhabi government-led consortium, Dolphin Energy.

In recent years, both Sharjah and Ajman have suffered power cuts in summer, which analysts have linked to high fuel costs and electricity subsidies.

Previously, Dana and its biggest shareholder, Sharjah-based Crescent Petroleum, collaborated on a project intended to import Iranian gas into Sharjah and market it to power and industrial facilities. The project failed due to a long-running contractual dispute with National Iranian Oil Company, which is now before an international arbitration court.

More than 90% of UAE's oil and gas output comes from Abu Dhabi.