Dana Gas is taking on the market

Dubai: As a regional private sector energy explorer, Dana Gas has already made its mark as a good example of how the private sector could help the Gulf states' governments boost energy output.

The company is at the forefront of major gas discoveries in the Middle East, it is also setting up energy clusters across the region that will eventually help develop the downstream petrochemical industry.

Gulf News caught up with Ahmad Rashid Al Arbeed, Dana Gas CEO, to get an update on the company's business.

Al Arbeed has wide experience in the international oil and gas industry, having been the chairman and managing director of the Kuwait Oil Company (KOC) and a board member of the Kuwait Petroleum Corporation (KPC). He has also served as the chairman and managing director of the Kuwait Foreign Petroleum Exploration Company, (KUFPEC) in addition, he has been the managing director of the "Kuwait Project" (the purpose of which was to re-introduce international oil companies to Kuwaiti oil fields) and he has been the managing director of the privatisation and R&D programmes of KPC.

In the interview, he spoke at length about the company's current business and future growth.

Gulf News: How is your company's business in Egypt and Iraq?

Ahmad Al Arbeed: In Egypt, we had a very successful exploration programme which increased our proven plus probable (2P) reserves by 40 per cent to 132 million barrels of oil equivalent (mmboe), while production is up by 20 per cent to an average of 37,400 barrels of oil equivalent per day (boepd) and we are expecting another 15-20 per cent rise in production in 2010.

In total, during 2009 Dana Gas produced nearly 62 billion cubic feet (bcf) of gas, plus 2.5 million barrels of petroleum liquids — a total of 12.7 mmboe — from nine development leases, eight in the Nile Delta and one in Upper Egypt.

Dana Gas is also one of the largest private sector investors in the Kurdistan region of Iraq, having produced gas and delivered it to two power stations at Bazian and Erbil in the region, and we plan to double our average daily gas production in 2010. In the UAE, we are moving ahead with the development of the Zora field, offshore Sharjah and Ajman.

Tell us a little more about your achievements and plans in Egypt.

Our operations in Egypt continue to go from strength to strength. Our exploration programme focused on the two Nile Delta concessions: West Manzala and West Qantara, and targeted multiple geological horizons across the acreage.

Our 12 well exploration programmes in 2009 yielded eight discoveries, an excellent outcome, of which we are extremely proud. Our success lay in the shallower horizons, the Kafr Al Shaikh and the Messinian aged formations, comprising the Abu Madi and Qawasim, with the two wells drilled into the deeper Sidi Salem, not encountering hydrocarbons.

Egypt production during the year averaged 34,700 boepd, a 20 per cent increase from 2008, as a result of three discoveries (Al Basant, Sondos and Azhar), being brought on stream during the year. Our 2P reserves increased by 40 per cent from 94 mmboe at the end of 2008 to 132 mmboe at the end of 2009, despite having produced 12.7 mmboe during the year. The increase represents an enviable 400 per cent production replacement ratio for our 2P reserves.

In terms of Dana Gas' plans for this year, our Nile Delta concessions' exploration portfolio has been reviewed by Gaffney Cline and Associates, the independent engineering consultants, who have reported a most likely risked resource of 1.6 trillion cubic feet of gas.

This acreage remains highly prospective and 2010 will see a 14-well exploration programme. By the end of March, the programme had resulted in two discoveries.

How was Dana Gas' overall operational and financial performance for 2009?

Dana Gas has grown progressively stronger throughout the year, both operationally and financially. Despite falling petroleum demand, energy price volatility and unprecedented financial turmoil, both regionally and globally, Dana Gas' performance was excellent. I firmly believe we have come through the global financial crisis in an even stronger position.

Revenue from the sale of hydrocarbons was up 12 per cent from 2008 to Dh1.28 billion, while gross profit was up 69 per cent to Dh436 million, and cash flow from operations is up 175 per cent to Dh385 million, reflecting Dana Gas' growing operations in Egypt, plus a full year of condensate production and sales from the Khor Mor field in the Kurdistan region of Iraq.

The financial crisis affected business worldwide during 2009; as the global economy recovers are you positioned to take advantage of opportunities?

Dana Gas is in a stronger position now than it was at the end of 2008, and with the right management team in place, we are fully confident of the next phase of growth on our existing and future projects, as we build our portfolio of assets for the longer term. Our intent is to ensure we remain the MENASA region's leading independent natural gas company.

Our accomplishments have been achieved despite delays to our UAE Gas Project to import gas from Iran. In addition, we are currently experiencing delays in the receipt of payments for condensate sales in Iraq.

We are working hard on both these issues and we are confident they will be resolved in a positive manner. Gas is a key fuel of the 21st century and the MENASA region is one of the world's most prolific sources of gas. Your company is well positioned to add value for all our stake-holders.

Dana Gas was formed to be a champion of gas within the MENASA region, is the Dana Gas vision still intact?

Dana Gas has stayed true to its promised identity and motto of being "From the Region, By the Region, For the Region".

We are developing solid business relationships and making important progress throughout the MENASA region and the Dana Gas reputation and brand is increasingly being recognised for its excellence.

We are continually working to develop and secure further access to resources to meet future demand, through the exploration and development of our concessions in Egypt, through our projects in Iraq and the UAE, supplemented by business development opportunities in MENASA that meet our economic hurdle rates.

The focus of the world is steadily shifting to cleaner, more sustainable energy sources. How are you coping with this global shift?

We pride ourselves on being at the forefront of global environmental responsibility, and we strongly identify with a low carbon energy future through gas, which is a much cleaner alternative fuel than other hydrocarbons.

As the MENASA region's leading Private Sector Company in this field, we feel an added responsibility to promote cleaner fuel.

What are you focusing on at the moment in terms of development of your business?

Our immediate and unrelenting focus is to move our existing projects forward, expanding production in Egypt and Iraq, commencing operations on our UAE gas project and progressing the development of the Zora field within the UAE.

In the longer term, recent forecasts predict that at least one third of the world's incremental gas consumption to 2030 will be supplied from the MENASA region.

Dana Gas is continually working to develop and secure further access to resources to meet this enormous future demand, whilst delivering shareholder value through well considered development and careful management of our asset portfolio.

The forthcoming year and beyond promise to be an exciting time for Dana Gas. We are looking forward to the challenges and the opportunities.

Networks: Growing assets

Dana Gas is the first regional private-sector natural gas company in the Middle East, established with over 300 reputable founder shareholders from across the GCC, and some 400,000 investors from over 100 nationalities who submitted applications of over $78 billion (Dh286.4 billion) over ten days in the company's regional IPO in late 2005.

Headquartered in Sharjah and listed on the Abu Dhabi Securities Exchange (ADX), Dana Gas already possesses a network of offices in Saudi Arabia, Iraqi Kurdistan, Egypt, and the UK, with more offices opening throughout the Middle East. Dana Gas currently has assets and projects in gas exploration and production, processing, transportation and marketing in several countries, and aims to play a major role in the rapidly-growing natural gas business throughout the Middle East, North Africa and South Asia (MENASA) region across the gas value chain.

In addition to its current projects, the company is developing a series of "Gas Cities" across the MENASA region. Gas City is a unique synergistic hub, an industrial cluster creating value chain synergies, by considering flow of input and output of the various processing and manufacturing units in its industrial park to create the first vibrant private sector natural gas based industrial city. The city will facilitate foreign and regional investment and promote private sector driven economic growth. The City will host industries ranging from natural gas based petrochemical plants and metals and minerals to pharmaceuticals and electronics.