"This is a high level broad agreement whereby we work together with the regional government to develop the long-term plans for overall gas development and optimal utilisation," Majid Jafar, Dana Gas business development director, said.

 

"There is an immediate need for power generation as a priority, there is also a strong desire to use this valuable resource to encourage industrial and broader economic development and job creation, and longer term there is also the possibility for potential exports, most likely by pipeline."

   

Billions in savings

 

Jafar said he was confident that the region was a sound investment prospect. Dana Gas's deal, as a service contract rather than a PSA, was unlikely to attract controversy, he said.

   

Nechirvan Barzani, the prime minister of Iraq's Kurdistan region, said: "The Kurdistan region is in urgent need of natural gas as fuel for electricity generation projects that are long overdue and will benefit not only the people of the Kurdistan region but contribute to affordable electricity for the whole of Iraq."

 

Use of domestic gas for the region's power plants will save the region up to $1.5bn as it substitutes the use of liquid fuels in generators currently used.

   

Quick development

 

Dana Gas will be able to develop the project quickly as it will install a gas splitter it had already built and earmarked for another project.

   

That probably gave it an advantage over competitors for the service contract, who would have taken two years to build the infrastructure needed for gas production and processing, industry sources said.

 

Dana Gas also won a service contract from the regional authority for the rapid installation of processing and transmission facilities at the Khor Mor field to begin supplying gas for power generation by January 2008.    

   

Dana Gas is the UAE's largest private-sector energy company by market value.