Dana Gas Venture Seeks $26.5 Billion Damages From Iraq Kurds

(Bloomberg) -- Dana Gas PJSC and its partners are seeking damages of at least $26.5 billion from Iraq's self-governing Kurdish region for delays in oil and natural gas projects, a U.S. court filing shows. The company's shares gained the most in more than three months.

United Arab Emirates-based Dana Gas and its partners in the venture, called Pearl Petroleum, filed a petition on May 12 in a federal court in Washington, D.C., seeking “recognition and enforcement” of awards in a London arbitration case, according to the U.S. court documents. The petition is part of a legal process that may allow Pearl Petroleum to seize Kurdish assets if the Kurds don't pay awards decided in arbitration.

The Kurdistan Regional Government “considers that the claimants' approach in the arbitration is unconstructive and unnecessarily escalates the dispute,” its energy ministry said Wednesday in a statement posted on its website. “The KRG will continue vigorously to pursue its rights and defend its position in all appropriate fora,” the ministry said Tuesday in an emailed statement.

Dana Gas declined to comment on the U.S. court filing, while Crescent Petroleum, its biggest shareholder and also a party to the filing, didn't have an immediate comment.

The partners are pursuing claims in the London Court of International Arbitration against the KRG for damages for delays they say were caused by the KRG in developing the projects. Dana Gas hasn't previously disclosed the amount of damages it's seeking in the case.

The shares jumped 5.1 percent, the most since Feb. 14, after climbing the most in more than a year in intraday trading. The company has lost about a quarter of its market value in the past six months, to 2.9 billion dirhams ($778 million).

Unpaid Receivables

Dana Gas, which is developing the Khor Mor and Chemchemal fields in northern Iraq through Pearl Petroleum, produces most of its oil and gas in Iraq and Egypt. Unpaid receivables from both countries have hurt the producer's ability to invest and repay creditors. The company, which had about $298 million of cash on hand at the end of March, is seeking to renegotiate terms on about $700 million in Islamic bonds due in October.

In November 2015, the London arbitration court awarded Pearl Petroleum about $2 billion for disputed and delayed payments. The venture has yet to collect all the money. The London tribunal ruled in January that the KRG had also impeded Pearl Petroleum's development work on fields in the region and said the court needed more time to decide the amount of damages to be awarded, according to arbitration documents attached to the U.S. filing.

The KRG faces “enormous financial pressures,” due partly to its fight against Islamic State militants and the cost of caring for refugees from the conflict, the region's energy ministry said.

The London tribunal will hold a hearing in September to determine the final amount of damages the KRG will need to pay Pearl Petroleum, Chief Executive Officer Patrick Allman-Ward said on an earnings conference call earlier this month. Allman-Ward also said KRG authorities had asked Pearl Petroleum to resume development of fields there.

Pearl Petroleum's biggest shareholders are Dana Gas and Crescent Petroleum, both based in the U.A.E. emirate of Sharjah. Austria's OMV AG, Hungarian energy group Mol Nyrt. and Germany's RWE AG also have shares, according to the venture's website.

The case is Pearl Petroleum Co. Ltd. et al v. Kurdistan Regional Government of Iraq, 1:17-cv-00894-APM U.S. District Court, District of Columbia (Washington, D.C.).

--With assistance from Stefania Bianchi

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net.

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley