By Simeon Kerr
Published: November 2 2009 16:34 | Last updated: November 2 2009 16:34
Dana Gas, the Sharjah-based oil and gas development company, is refocusing its efforts on a planned series of industrial developments around the Middle East as it aims to use natural resources for local development rather than exports.
After a slowdown during the global financial crisis, the region’s first listed energy company says it is again moving ahead with talks to secure anchor tenants for an industrial site near Chamchamal, in Iraq’s Kurdistan region.
Dana Gas argues that local governments, after securing power for their people, should use gas resources to fuel local industries in order to boost economic productivity, before selling their resources to foreign companies for export.
The company’s first gas production in Iraq’s Kurdish north has been used to generate electricity, helping Iraq’s most stable region boost provision from two to 20 hours a day. The rest of Iraq, however, continues to struggle with distribution levels languishing at little more than two hours a day.
The 40 sq km site is a free zone operated by Gas Cities – a joint venture between Dana Gas and its co-founder Crescent Petroleum – and aims to attract companies that would use the gas feedstock to produce fertilisers, steel, concrete and other building materials.
“In somewhere like the Kurdistan region, there is a massive construction boom and the whole of Iraq is also going to see sharp growth in local needs with a housing shortage,” says Ahmed al-Arbeed, Dana’s chief executive.
The Gas Cities concept is also designed to produce employment for the region.
“Job creation is policy priority number one for any country with a big population – Saudi Arabia, Egypt, Iraq or Iran – as they struggle with the burgeoning youth bulge,” he adds.
The company shrugs off concerns that the continuing disputes between the regional government in Kurdistan and the central authorities in Baghdad could hamper future export arrangements.
The Kurdish government has suspended oil exports via the federal pipeline as the two sides argue over the Kurds’ award of upstream licences to foreign companies. But Dana says its Gas City is a downstream facility, with no impact on upstream licences.
However, other sites outside Kurdistan could be more export-focused, the company says. Those with ports could house other more lucrative industries, such as methanol and other petrochemical production.
The company has signed a memorandum of understanding with Yemen and Egypt and it has received expressions of interest from two other Iraqi provinces, Basra and Anbar. Two Arab Gulf states are also looking at inviting the company to set up a site.
Dana, which has increased operated gas production by 50 per cent over the past year, also has other plans for its home market. The company has power and industrial clients waiting for Iranian gas feedstock that has been delayed for almost four years on technical and political issues.
Crescent Petroleum has gone to arbitration to secure the supplies and notes that its counterparty, the National Iranian Oil Company, has also hired an international contractor to finish commissioning work on its side of the cross- border gas production and export facilities.
Dana, which was launched partly on the basis of the Iranian gas feedstock, has diversified into other countries since its 2005 launch, with upstream operations in Egypt. It is also investing $140m to develop an offshore gas field in Sharjah slated for production late next year.
© The Financial Times Limited 2009.