Dubai: A UAE-based company, Gascities, is planning to invest between $2 to $3 billion (Dh10.8 billion) each in a number of energy clusters, under the ‘Gas City' branding, which in turn could attract potentially up to $30-$40 billion in third-party investment in mid-stream and downstream petrochemical and associated industries, a top official said.
"We are planning to roll out a number of Gas Cities in the Middle East that will help economies in the region," Badr Jafar, chairman of Gascities Ltd, told Gulf News in an interview.
"In each of these cities, we will develop the masterplanning, infrastructure and investors could set up gas-based industries. There will be real estate, office and hospitality components, making them integrated communities with education and healthcare facilities."
Gascities is a 50/50 joint venture between UAE-based energy explorers Dana Gas PJSC and Crescent Petroleum for the development of Gas City clusters across the energy-rich Middle East. It is planning to develop about three energy clusters across the region, namely in Kurdistan in Iraq, Egypt and Yemen where both companies have major interests in energy exploration and distribution.
"In Egypt the overall investment will be at least $10 billion more, with $3 billion on initial infrastructure," Jafar said.
"In both cases Crescent Petroleum and Dana Gas will possibly look to take equity stakes in the various parts of the projects,"
Integrated energy clusters, Gas Cities are expected to help the Middle East's energy sector reshape and strengthen output in the coming years.
"There are many benefits to having designated industry cities. Gas Cities, in particular, are private-sector led, self-sustaining, fully-integrated industrial cities designed for the systematic and comprehensive utilisation of natural gas as fuel and feedstock," he said. "The Gas City concept involves developing a sustainable industrial city based on primary gas processing industries in tandem with clustered, high employment industries supported by a commercial service sector."
Total gas reserve in the GCC remained stable at 42 trillion cubic metres last year while proven oil reserves stood at 496 billion barrels.
The GCC countries last year accounted for around 40 per cent and 23 per cent of world proven oil and gas reserves, respectively, and accounted for 23 per cent and eight per cent of global oil and gas production, respectively.
Qatar, the UAE, Kuwait and Saudi Arabia have the bulk of reserves and production.
The Middle East accounts for nearly 80 per cent of global readily accessible reserves, with around 62 per cent derived from Opec, GCC countries and Iraq.GCC hydrocarbon revenues last year stood at a record level of $460 billion, most of which were channelled to the respective countries' sovereign wealth funds.
Decline
"Although this figure is expected to decline significantly in 2009 due to lower energy prices, a large pool of liquidity is enabling regional countries to adopt pro-cyclical government spending policies by increasing government expenditure and thus supporting their domestic economies during the global economic recession," said a latest report by Moody's Investors Service.
"This abundance of hydrocarbon reserves constitutes one of the region's main competitive advantages and has historically been a main driver of economic growth, social prosperity and government liquidity."
According to International Energy Agency (IEA), the Middle East and Asia — and particularly China and India — will dominate oil demand growth over the next five years. Asian and Middle Eastern oil demand is expected to grow by 492,000 bpd and 325,000 bpd, respectively, by 2013.
In this context, energy clusters such as Gas Cities could help the industry going forward. As such, the Gulf has a few good integrated facilities in the Gulf coasts including, Dammam, Jubail, Dhahran in Saudi Arabia, Ras Laffan in Qatar and Ruwais in Abu Dhabi.
Total value of oil, gas and petrochemical industries projects budgeted in the GCC is $690 billion, according to research organisation Proleads.
In an exclusive interview, Badr Jafar explains the concept. Excerpts:
Gulf News: Could you explain the Gas Cities concept in more detail?
Badr Jafar: Gas Cities are built upon a unique concept inspired by the elements of community living and the benefits of natural gas-based industrial clusters. The idea is conceptualised around the live-work-play-learn theme. That is, the city is envisaged to provide all the required amenities to live, work, play and learn, making it an integrated community whereby primary and supportive functions interlace to form a synergistic and self-sustaining industrial city.
The concept of Gas Cities is based on the effective utilisation of natural gas as feedstock, thereby maximising the value of industrial outputs. In the Gas Cities, available natural gas is converted into economically viable hydrocarbon related products and derivatives by systematically utilising the operational synergies and economies of scale arising from geographically clustered industrial units. The primary objective of Gas Cities is to maximise the economic benefit of locally produced natural gas, prior to exports, through generating mass local industry, jobs and foreign direct investment. The successful implementation of this value-added concept requires the creation of numerous public-private-partnerships (PPPs), and this is one of the reasons that we are working very closely with the relevant regional governments, ensuring that the cities will be successful in achieving these objectives.
What edge does this joint venture give Gascities?
Crescent Petroleum is the region's oldest private-sector indigenous petroleum company, and Dana Gas is the regions' largest private sector publicly listed integrated natural gas company. Combined, the companies have over 45 years of expertise in all aspects pertaining to the oil and gas industry, and extensive experience with integrated natural gas projects. Together with our partners, Gas Cities has all the essential skills required to implement the concept.
Why did you choose Yemen as the location for your new Gas City? What will be the benefit to the country of having a Gas City?
The Gas City concept has the potential to promote significant economic activity in Yemen and bring substantial foreign investments directly into local markets, which will catalyse economic growth and encourage investment-driven developments and job placements. We believe that Yemen Gas City will help provide a focus for the Yemeni Government's plans to make optimal use of Yemen's increasing natural gas reserves by achieving maximum value generation through use in power generation and diversified local industry.
Yemen Gas City will comprise a C1 Chemistry Park containing methanol, methanol derivative and fertiliser factories; a utilities hub that will make the project completely self-sufficient for all utilities, and will provide additional power that can be utilised by the Yemen National Electricity Grid; industrial clusters with a supporting services sector; and residential and municipal developments. Yemen's markets will benefit directly from employment development opportunities in the industrial clusters, as well as from locally manufactured products distributed from the Yemen Gas City industries.
Did Crescent Petroleum's experience in Yemen influence the selection of the country as a site for a Gas City?
Crescent Petroleum was the concession holder and lead partner in exploration and production activities under a Production Sharing Agreement in Yemen in the early 1990s. The company's knowledge of local culture and use of its local relationships enabled the consortium to carry out the operation which other international companies found difficult to manage.
You have plans to build Gas Cities elsewhere in the Middle East and North Africa. Are these still going ahead?
Gas Cities is currently working on establishing a number of clusters throughout the Middle East, North Africa and South Asia (MENASA) region and advanced discussions with a number of host governments are under way. Every Gas City will be unique in its design, makeup and content because of the very different prevailing conditions on the ground in the various countries we are exploring, such as geographical location, availability of raw natural gas, the state of local industry and local regulatory frameworks.
Is having designated industry cities like Gas Cities the new way to go?
There are many benefits to having designated industry cities, not least of which is the fact that such cities allow us to cluster similar, synergistic industries and inter-connected services in a way that minimises cost, maximises efficiency and limits waste.
