The Middle East and North Africa (MENA) region’s oil and gas producers are the cornerstone of the global energy system. The first half of 2022 saw the UAE award approximately $1.4 billion in oil and gas contracts, while natural gas projects have been witnessing a major upward trend over the past five years.
As international oil companies invest more in natural gas production due to its lower carbon footprint, while countries in Europe and elsewhere are looking for alternate sources to replace Russian energy, supply of natural gas has become central in the quest for resilience in the energy system.
One company that realised the value of cleaner-burning natural gas – long considered a waste by-product of oil production – is Crescent Petroleum. The company’s history mirrors that of the UAE, beginning in 1969 with the signing of an oil concession agreement with the Government of Sharjah, followed by the discovery of oil and its establishment
in 1971.
Not long after, Crescent Petroleum began pioneering the use of natural gas in the region, recognising its role in generating electricity and powering local industry, which has proved to be a key ingredient in the country’s success. Over the last 50 years, it has also grown its oil and gas business across other industries as well as pursued opportunities in various sectors, which together make up the Crescent Group of companies today.
In an exclusive interview with Oil & Gas Middle East on the 50th anniversary of Crescent Petroleum, Majid Jafar, the CEO of Crescent Petroleum and vice-chairman of the Crescent Group, outlines the company’s significant milestones over the past 50 years, and highlights how it pioneered natural gas in the region, as well as the company achieving and maintaining carbon neutrality across its operations.
Despite the Middle East region’s central role in oil and gas, it has comparatively few privately-owned upstream companies, with the majority of production dominated by national oil companies and western majors thus far. This has permitted Crescent Petroleum, a family-owned company in Sharjah, to carve out a niche based on entrepreneurial business development, long-term partnership, and rapid project execution.
Jafar says that the key to this success is long-term perspective and strategic patience, which he notes is essential for the sector, given the long-term nature of capital investments and
significant challenges.
Jafar adds: “From the start, my father Hamid Jafar – our founder and group chairman imparted a culture of ethics, creativity and a can-do attitude in the company and has always been our greatest teacher. We are all proud to be part of the business, which is also evidenced by how long our employees tend to stay. As we celebrated 50 years of operations, we also celebrated many employees who had been with the company for many decades.
“For me, it has been a pleasure and privilege to work with these amazing people who are the reason for our success and to have family members – my father, brother, and sister – as colleagues.”
Jafar also states that the UAE has provided Crescent Petroleum with a firm base to prosper and grow internationally, allowing the business to maintain its values and stay true to its mission and purpose.
Among the business’ key milestones, he highlights: “We discovered oil from the Mubarak field in Sharjah in 1971, and its operations continued for another 40 years. Meanwhile, in the 1980s, for the first time, we formed natural gas contracts between Sharjah and Dubai, which gradually grew regionally through the launch of Dana Gas in 2005 and our pivotal role in Iraq’s gas sector.”
Crescent Petroleum entered Iraq in 2007 with an ambitious project in the Kurdistan region when oil majors were wary of entering the country. He says: “We [Crescent Petroleum and Dana Gas] were awarded the exclusive rights to develop natural gas and condensate from the Khor Mor and Chemchemal Gas Fields to fuel electric power generation plants in Erbil and Chemchemal, as well as for the local industry.”
The combined entity became the largest private sector investor in Iraq’s natural gas sector and built the necessary infrastructure to support the passage of natural gas in the region, contributing to transforming the local economy. Moreover, it is operating the two largest gas fields in Iraq – having invested close to $3 billion in the last 15 years – and has won three more blocks and five more oil and gas fields in 2018.
Natural gas now makes up 85% of Crescent Petroleum’s total production, while the company’s affiliate Dana Gas is also the fifth largest gas producer in Egypt.
Sustainability in action
In 2021, Crescent Petroleum became one of the first companies in the industry to achieve carbon neutrality across its operations after completing a series of projects to reduce carbon intensity and offset remaining emissions.
Jafar says that milestone was the culmination of years of concerted effort and highlights Crescent Petroleum’s efforts at reducing gas flaring by nearly 80% to just 0.12% of production. He explains that flaring will be further reduced towards zero going forward: “These process improvements make us among the lowest emitters in the sector and have allowed us to achieve a carbon intensity of 6.0 kgCO2e/boe, which is less than one-third of the industry average.”
He continues: “We then offset the remaining emissions from our operations with UN-certified carbon credits to support renewable wind power projects in China and Mongolia, supporting cleaner electricity that would normally be generated by burning coal.”
“Even more important than our operations has been the positive effect of our product,” says Jafar, revealing that the gas they produce currently, by replacing diesel-burning in power stations, avoids more than 5 million tonnes of CO2 per year – which is more than the emissions avoided by all the Tesla vehicles being driven globally.
Tackling the trilemma
Jafar highlights that the world is going through its first truly global energy crisis and failing across all three vectors of the energy trilemma: affordability, availability, and sustainability. He notes that what may seem advantageous for an oil and gas company in terms of business results is, in fact, a “very concerning” situation for the world economy.
“Many people believed that not investing in oil and gas was the solution to tackling climate change, and now we see the result – unaffordable electricity even in wealthy countries, risk of blackouts, and rising CO2 emissions due to more coal being burned.”
To really deal with climate change, he says there must be resilience in global energy systems.
Jafar continues: “This will help us to avoid crises like these in the future, and in the process, we can collectively reduce carbon emissions and help stave off the worst of the emissions issues. In this regard, the UAE’s energy strategy for 2050 is well-balanced and realistic, combining 44% of clean energy with 38% of natural gas, while clean coal and nuclear make up 18%.
“The biggest challenge to this [adopting natural gas] is the shortfall in funding for new development in the industry, impacted in part by growing fears around government regulation, but also by the unwillingness of stakeholders to invest funds for such a long period; however, this year has taught us all about the perils of under-investment.”
Over the coming year, we aim to complete the implementation of the $860 million expansion project to grow our Kurdistan production by 50% by early 2024.
Majid Jafar, CEO, Crescent Petroleum
Looking ahead
As the oldest and largest privately held petroleum company in the region, Crescent Petroleum is defined by its mission to creatively unlock energy resources to serve the local economy and the associated communities, he says, adding: “That’s what gets us up every day and every single employee in the company shares that ethos and knows that their role is important in delivering this purpose.”
Jafar highlights that this region has half the world’s proven oil and gas reserves, which are also the lowest in terms of cost and some of the cleanest burning. Yet the region accounts for only a third of global oil production and a sixth of the gas production, so the potential to grow is clear.
The global industry has had a particularly challenging 2020 when oil prices were $20 per barrel, but since then, it has recovered significantly. “We have increased our production by 11% over the past year, and with oil now between $80 to $100 per barrel, business performance has been robust, partly driven by the improvement in oil and gas prices, but also by a series of process improvements and efficiencies implemented in recent years.”
Jafar also reveals that Crescent Petroleum has grown its production by 64% over the last five years, with plans to continue this track record based on proven reserves and rising demand.
“Over the coming year, we aim to complete the implementation of the $860 million expansion project to grow our Kurdistan production by 50% by early 2024. The next step, beyond that, is to raise production to 1 billion cubic feet per day, commence the projects in other parts of Iraq, as we also pursue upstream opportunities in North Africa.”
When asked to elaborate, he stresses that for the last 50 years, Crescent Petroleum has leveraged its understanding of the Middle East to promote cleaner energy and sustainable development; hence the company stands firm in its belief in the role natural gas will have in replacing coal and liquid fuels in the developing world.
“This is a critical part of the energy transition and a necessary enabler for renewables adoption as well as a future hydrogen economy, and we aim to champion that role and encourage the development of smart policy,” concludes Jafar.
