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Weak demand delays Dragon gas deal

DRAGON Oil became the second explorer with Irish links to warn over the last few days of possible problems.

Dragon, which focuses on Turkmenistan, said it expects a delay in reaching a natural-gas sales agreement with the Central Asian state's government because demand for the fuel has weakened.

Tullow Oil warned last week that production would be below target because of problems with drilling in Ghana.

Both companies have their main listing in London and secondary listings here.

"The market for Turkmen gas is not improving," chief executive officer Abdul Jaleel Al Khalifa told Bloomberg yesterday, declining to estimate a timeframe for an accord.

Dragon's shares still closed higher as the company said it expects sales to rise 15pc next year and its cash pile swelled to more than $1.5bn (€1.15bn).

Dragon is seeking agreement on gas sales terms with the government in Turkmenistan, where it has three trillion cubic feet of resources, to add to sales that rose to a record last year.

Gas-treatment plant

The company plans to build a gas-treatment plant in the Caspian Sea state, allowing it to strip liquids from the fuel before selling it or burning it off.

It has reduced gas burning, a process known as flaring, by injecting the fuel into the Turkmen pipeline network, Mr Al Khalifa said.

In the absence of a sales agreement, such injections into the grid mean Dragon is effectively giving the gas away. The company plans to award contracts to build the treatment facility this year, and extract liquids from 2014.

Dragon raised output 30pc last year to about 61,500 barrels of oil a day and targets a 15pc gain in 2012, it said in a statement. Dragon shares rose 2.6pc to 513p in London, the highest price in two months. The shares are up 12pc since the start of the year. (Additional reporting Bloomberg)

Irish Independent