DanaGas, the Sharjah-based oil and gas development company, is refocusingits efforts on a planned series of industrial developments around theMiddle East as it aims to use natural resources for local developmentrather than exports.
After a slowdown during the globalfinancial crisis, the region’s first listed energy company says it isagain moving ahead with talks to secure anchor tenants for anindustrial site near Chamchamal, in Iraq’s Kurdistan region.
DanaGas argues that local governments, after securing power for theirpeople, should use gas resources to fuel local industries in order toboost economic productivity, before selling their resources to foreigncompanies for export.
The company’s first gas production inIraq’s Kurdish north has been used to generate electricity, helpingIraq’s most stable region boost provision from two to 20 hours a day.The rest of Iraq, however, continues to struggle with distributionlevels languishing at little more than two hours a day.
The 40sq km site is a free zone operated by Gas Cities – a joint venturebetween Dana Gas and its co-founder Crescent Petroleum – and aims toattract companies that would use the gas feedstock to producefertilisers, steel, concrete and other building materials.
“Insomewhere like the Kurdistan region, there is a massive constructionboom and the whole of Iraq is also going to see sharp growth in localneeds with a housing shortage,” says Ahmed al-Arbeed, Dana’s chiefexecutive.
The Gas Cities concept is also designed to produce employment for the region.
“Jobcreation is policy priority number one for any country with a bigpopulation – Saudi Arabia, Egypt, Iraq or Iran – as they struggle withthe burgeoning youth bulge,” he adds.
The company shrugs offconcerns that the continuing disputes between the regional governmentin Kurdistan and the central authorities in Baghdad could hamper futureexport arrangements.
The Kurdish government has suspended oilexports via the federal pipeline as the two sides argue over the Kurds’award of upstream licences to foreign companies. But Dana says its GasCity is a downstream facility, with no impact on upstream licences.
However,other sites outside Kurdistan could be more export-focused, the companysays. Those with ports could house other more lucrative industries,such as methanol and other petrochemical production.
The companyhas signed a memorandum of understanding with Yemen and Egypt and ithas received expressions of interest from two other Iraqi provinces,Basra and Anbar. Two Arab Gulf states are also looking at inviting thecompany to set up a site.
Dana, which has increased operated gasproduction by 50 per cent over the past year, also has other plans forits home market. The company has power and industrial clients waitingfor Iranian gas feedstock that has been delayed for almost four yearson technical and political issues.
Crescent Petroleum has goneto arbitration to secure the supplies and notes that its counterparty,the National Iranian Oil Company, has also hired an internationalcontractor to finish commissioning work on its side of thecross- border gas production and export facilities.
Dana, whichwas launched partly on the basis of the Iranian gas feedstock, hasdiversified into other countries since its 2005 launch, with upstreamoperations in Egypt. It is also investing $140m to develop an offshoregas field in Sharjah slated for production late next year.