(Specifies start up date in August, changes attribution in lead, adds background)

By Simon Webb

DUBAI, July 29 (Reuters) - United Arab Emirates-based Crescent Petroleum and its affiliate Dana Gas DANA.AD will begin supplying natural gas in Iraq's Kurdish region in August, an executive director at Crescent said on Tuesday.

The $650-million project will initially supply 150 million cubic feet per day (cfd) to Kurdish power plants, rising to 300 million cfd in early 2009, the companies said in a statement.

"Gas supplies will begin in August," Majid Jafar, executive director of Crescent Petroleum and board member of Dana Gas, told Reuters. The companies last said supplies would start up in mid-2008.

Dana and Crescent signed the deal to redevelop the Khor Mor field in the semi-autonomous Kurdish region to supply gas to the power plants in April 2007. The field was shut after the first Gulf War in 1991.

The gas will go to a power plant in Arbil and another in Sulaimaniya, with combined generation capacity of 1,250 megawatts.

The plants will save Iraq over $2 billion annually in fuel costs, the companies said -- cash the government currently spends on oil products for small power generators.

"We as regional companies can address what Iraq and other countries in the region really need..., which is utilising gas resources locally," Jafar said.

GAS CITY

Dana and Crescent also signed up last year to evaluate the region's gas reserves and to build a large gas-fed industrial complex called Kurdistan Gas City.

Initial investment in the basic infrastructure for the complex would be $3 billion, the companies said on Tuesday.

Dana and Crescent would lead the development and would be joined by partner companies, Jafar said. The companies gave no further details on how much of the $3 billion they would contribute. The Kurdish regional government has allocated land for the gas complex, which the companies said would eventually attract more than $40 billion in foreign direct investment.

The complex will house at least 20 large petrochemical and heavy manufacturing plants with output that will mostly be consumed in Iraq, Jafar said.

The companies estimated that the project could generate direct and indirect job opportunities for nearly 200,000 people.

Iraq needs billions in investment to rebuild its economy after years of sanctions and war. The Kurdish region largely escaped the sectarian violence suffered in the rest of Iraq after the U.S.-led invasion of March 2003 and is undergoing rapid economic development.

The Kurdish government has angered Baghdad by moving ahead with plans to develop its oil and gas industry while political wrangling has delayed a federal oil and gas law from reaching parliament.

Baghdad has barred companies with Kurdish contracts from competing for contracts in the rest of Iraq, while the Kurdish government says its deals are in line with the federal constitution.

Crescent and Dana have formed a joint venture, Gas Cities LLC, to develop the complex and others in the Middle East, North Africa and South Asia, the companies said. (Reporting by Simon Webb and Sanam Foroughi; editing by Anthony Barker) y

UPDATE 2-UAE Crescent to begin Iraqi Kurd gas supply in Aug -  Source