Dana Gas has delivered on its mandate of delivering much-needed power to the people of Iraq and begun achieving hugely impressive results on its Egyptian discoveries. Oil & Gas Middle East speaks to chief executive officer, Ahmed Al Arbeed.
Dana Gas has had a stellar start to 2011. On the back of full year results for last year which recorded an 80% rise in profits on the back of a production increase of 31%, the company set the industry media alight with first quarter results in 2011, up 180% year-on-year and looks set to continue its record-breaking trajectory.
The company is the largest regional private sector natural gas company, encompassing the whole gamut of activities from exploration to gas deliveries to power plants in some of the region’s toughest environments.
The company’s primary activities are currently in the Kurdistan Region of Iraq and in Egypt, though CEO Ahmed Al Arbeed tells Oil & Gas Middle East that despite a watershed year in terms of performance, his regional appetite remains undiminished.
“We are very optimistic that Egypt seems to be coming out of its period of unrest now. What is important to note is that we were doing very well throughout that period. We proved that we would be good to our word and continue our exploration efforts, and in fact we made an important discovery during this time,” enthuses Al Arbeed.
The discovery he refers to is the South Abu El Naga-2 well in the West El Manzala concession area. Dana Gas encountered 16.6 meters of net pay in the Abu Madi formation, and in addition, the well encountered 4.8 meters of net pay in a good-quality sandstone reservoir of the El Wastani formation, representing a new pool discovery.
On test, the well produced 14.1 million standard cubic feet per day (MMscfpd) of gas with 718 barrels of condensate from the Abu Madi Formation, and 5.9 MMscfpd of dry gas from the El Wastani Formation.
The discovery comes after the announcement of the previous South Abu El Naga-1ST discovery in September 2010, where the calculated reserves estimate is in the range of 50 to 90 billion standard cubic feet (Bcf) of gas, with associated condensate reserves between 1 and 2 million barrels.
Dana Gas Egypt produced around 4.25 million barrels of oil equivalent during the first quarter, an increase of 20% compared to the same period last year, which included production from the Ward Delta and West Ward Delta fields which were brought on stream in March 2011.
“Many other companies stopped their operations and some went as far as to shift their business units away from Egypt for the time being. We did not do that. In fact we felt that the opposite was the best course of action. Egypt remains a primary focus for us and we see a fruitful future for us and the Egyptians by sticking by them now,” he explains.
Al Arbeed says that his approach to risk has remained the same, though perhaps in future more contingency planning will be part of the normal approach.
“We are always careful about how we spend the shareholders money, but the way we have spent it so far has delivered excellent results. We have increased production and increased resources. So far everything is going in the right direction for us,” he says.
Staying the course in Egypt has delivered tangible benefits beyond the upstream achievements, and the CEO says that staying put and generating resources and revenue streams for Egypt has bought the company valuable good will. “That has proved to be unanimously the case.
The Egyptians know how we behave in such circumstances and we think the more we support their own private sector – and the same is true in Iraq for that matter – the more the relationships strengthen and grow,” he says.
Al Arbeed acknowledges it will take time for real stability to return to Egypt, but that more than ever the country will value its strategic partners.
“We have been consistently careful not to risk our core values, but that relationship is bearing fruit. The Ministry is now opening up to us. We now have a hugely helpful and constructive relationship with the Ministry,” he explains.
Today the company is producing around 250 million standard cubic feet per day of gas in Egypt, but Al Arbeed is confident this can rise to around 400 million SCFD.
“This is our objective with our current projects, and is almost 80% higher than what we have today. We think Egypt is a prime asset for Dana Gas and there is a lot more to come,” he says.
The company’s exploration remit expires next year, and Al Arbeed says the company has until then to explore for more resources. “We have succeeded very well over the last three years and because of that we have now been granted a wider concession area. We are probably the best exploration firm for this area in Egypt now because we know the geology so well.”
Kurdistan Snapshot
Outside of Egypt, the company’s other dominant sphere is the Kurdistan Region of Iraq. In the first quarter of 2011 Dana Gas, net to its 40% share, produced 1.75 million barrels of oil equivalent of gas, condensate and LPG during the period, an increase of 80% over the same period in 2010.
Construction of the LPG Plant at Khor Mor is now complete and production of LPG has commenced. Gas production from Khor Mor will increase as demand from the power stations increases, and as new customers in the region are established.
“Our Kurdistan operations are becoming increasingly efficient,” explains Al Arbeed.
“Kurdistan has not even started fully realising its potential. At the moment we are only producing 250 million standard cubic feet of gas per day (scfd), while the reserves there will allow for much greater production, possibly billions of scfd.”
Currently all of the Dana Gas’ production in Kurdistan is being used locally, but the region has the potential to export a huge amount of gas. “Today that 250m scfd is used for local power stations.
That production can be increased substantially, but will also require investment. Our infrastructure there has a design capacity of around 300 million scfd, and we expect to reach that level this year,” he says.
Further expansion would require the drilling of new wells, as well as additional production infrastructure spending says Al Arbeed, but the potential benefits to the region are enormous.
Though not there yet, Al Arbeed sees Iraq as a potential gas powerhouse, and that positive signs on the ground there could see a rapidly developed gas network, which represents a huge opportunity for private, and public-private partnerships.
“Of course, Qatar has been a remarkable story. But I think there remains real potential for Iraq to develop a similar infrastructure. If the political situation and international relationships were improved, I think there is a massive opportunity,” he explains.
Market Liberalisation
Al Arbeed has spoken extensively on the benefits of opening energy resources and their development up to private sector companies. Widely regarded as being more efficient and more nimble in emerging markets, he says that while official announcements are thin on the ground, sentiments in the region are shifting to a more liberalised approach.
“There are a lot of talks and discussions at the highest levels of government. I think there is a general thought migration towards allowing the private sector greater freedom to be entrepreneurial in the gas exploration, production and delivery business,” he says.
“If you can cast your mind back to the 1980s we would never have considered that Saudi Arabia would bring in a foreign company to carry out exploration work, but now that is happening.
This is a very positive move in my view. It will take time to change perceptions, but I am confident we are witnessing an era of change, and we are on the right track.”
New Markets
Al Arbeed has also set his strategic sights on Algeria and Syria as future markets of choice.
“Last year we submitted a bid in Algeria, but came a very close second. We remain undaunted and are involved in positive discussions with Sonatrach. Last year we were qualified as investors, and recently gained qualification as an operator there,” he says.
Youcef Yousfi, Algeria’s Energy Minister, has declared that he wants to increase gas reserves in the next three years. This will involve intensive exploration, presenting a significant opportunity to expand Dana Gas’ operational footprint in Northern Africa.
Closer to home, the CEO says he has the backing of the board to enter the Syrian market. “We are serious about our intentions to operate in Syria.
“We have not yet been awarded any work there, and we expect the current climate will have to improve before our ambitions progress. We see huge potential to connect Syrian gas production to export pipelines and to Lebanon,” he says.
Looking forward to a year of even greater production, peppered with some exciting exploration opportunities, Al Arbeed says the company is on a sure footing to achieve its three-year objective. “Right now we are happy with our current goal of wanting to produce approximately 260,000 barrels of oil equivalent by 2011,” he says.
