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KRG Response to Statement by Dana Gas PJSC in Connection with Ongoing Arbitration Proceedings

natural resources ministry krgThe Kurdistan Regional Government (KRG) refers to public statements made by Dana Gas PJSC (“Dana”) in connection with ongoing arbitral proceedings between Dana and the KRG. The arbitration is subject to duties of confidentiality under applicable law and arbitration rules.  Without waiving these duties of confidentiality, the KRG is obliged to correct inaccurate statements made by Dana, in order to ensure that the market is not misled.  In general, Dana’s public statement is highly misleading to the market and creates an impression that is both inaccurate and incomplete.

On 2 July 2015, the KRG received a partial ruling from arbitral tribunal in the ongoing arbitration between the KRG, Dana and others.  The partial ruling addressed a limited number of issues of contractual interpretation and did not make any monetary award in favor of any party.  The tribunal’s partial award rejected Dana’s position on some issues and accepted it on others.  Many disputed issues, including the KRG’s counterclaims against Dana and others for significant monetary damages, were not addressed in the tribunal’s partial ruling and will be heard at a later stage of the arbitration.

Dana’s public statements about the partial award are inaccurate and/or incomplete in numerous material respects, including but not limited to the following:

  1. Dana omits to mention that it failed entirely in claims with significant monetary consequences.  The Tribunal found, for example, that there is no contractual basis for over US$ 1.3 billion of invoices that Dana had purported to issue to the KRG.  These invoices were wrongfully issued and must be withdrawn in their entirety.
  2. Dana also omits to mention that the Tribunal has concluded that the KRG is entitled to be supplied free of charge with all the gas produced at Khor Mor and required by the power stations at Erbil and Bazian in accordance with the parties’ existing service plan.  Contrary to Dana’s previous assertions, the Tribunal has concluded that Dana was not and is not entitled to any payment for gas supplied on this basis in excess of 200 Mmscf/day.
  3. Dana’s assertions about an alleged entitlement to “farm out” rights and obligations under the HoA are inaccurate.  The Tribunal concluded that important elements of the previous arrangements Dana had purported to enter into were ineffective and without legal effect as against the KRG.
  4. The Tribunal concluded that a purported novation of Dana’s obligations to Pearl Petroleum Company Limited was ineffective, and that Dana, therefore, remains fully liable to the KRG under the HoA for the performance of its obligations.  In the light of that finding, the KRG will continue vigorously to pursue its claims against Dana for breaches of those obligations, including its claims for damages.
  5. Dana mischaracterises the nature and consequences of the Tribunal’s findings on its rights at Khor Mor and Chemchemal.  Any further exploration and development plans at either field are subject to the approval of the KRG, in accordance with inter alia the Kurdistan Region Oil and Gas Law and international petroleum industry practice.  Moreover, under Kurdistan Region law, the resources in both areas have been and remain the property of the KRG.
  6. The partial ruling did not contain any award of monetary damages to Dana.
  7. Dana mischaracterises the English court proceedings between it and the KRG.  It is a matter of public record that Dana’s previous attempts to serve the KRG with a claim in the English courts were set aside, and Dana was ordered to pay indemnity costs to the KRG, because of Dana’s failure to comply with mandatory provisions of the United Kingdom State Immunity Act 1978.  At this stage, the English courts have made no further determinations and the KRG’s rights, as to jurisdiction and otherwise, are reserved in full.
  8. Dana does not disclose that the Tribunal has reached no final determination on the KRG’s counterclaims for damages against Dana.

The KRG has incurred significant damages as a result of the failure of Dana and its principals to honor their obligations, and will continue vigorously to pursue its claims for damages and other relief against both Dana and its principals in all appropriate fora.

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