Dragon OIL, which has announced pre-tax losses of $64 million (€61 million) in 1998, is negotiating with the European Bank for Reconstruction and Development (EBRD) for development finance of some $120 million. This financial package is expected to be completed by the end of the year.

In the meantime, the Emirates National Oil Company has undertaken to provide sufficient financial support to "meet the group's obligations as they fall due until September 2000", Dragon said. ENOC, controlled by the government of Dubai, owns 69 per cent of Dragon following a mandatory offer last year, and intends to retain its share quotation.

The change of ownership has created uncertainty over the future of the deputy chairman and chief executive of Dragon, Dr Oliver Waldron, and technical director Mr Grant Bowler, who gave a month's notice that the services they provide under consultancy arrangements would be withdrawn from June 26th. Industry sources said the resignations were tendered to give the new owners the opportunity to make board changes without any legal impediments. This, the sources added, would give the Dubai government "more flexibility".

Negotiations with the EBRD will centre on project finance for block 11 in Turkmenistan, but the bank is also likely to look for continuity of management, or a management team acceptable to it. EBRD will have a lien over the project.

Dragon's losses last year were due to large write-offs. These included an exceptional $46.1 million write-down of Far East assets and an $8.5 million write down of its investment in Celtic Resources Holdings.