New horizons

Flushed with success following his promotion from VP of Downstream to CEO of Dana Gas, Ahmed Al Arbeed, tells Diana Milne how his company plans to transform the region’s energy industry.

“We are focussing on a number of different countries in the region, of course. We start with the Gulf region and then we will move onto North Africa, especially Algeria and Libya”
-Ahmed Al Arbeed

Having already established itself as the Middle East’s largest private sector gas company, Dana Gas’ CEO Ahmed Al Arbeed says it is now on the cusp of being one of the world’s most innovative. Its Gas Cities project will revolutionise the way gas is produced and used, with sustainability at the core of the concept. Once complete the Gas Cities will be fully integrated industrial zones designed to promote economic activity and attract lucrative foreign investment to the region’s burgeoning natural gas sector. The idea is that gas will produced in the industrial cities which is then either converted into economically viable petroleum products or used as feedstock, so that nothing is wasted and each element of production and supply chain supports the city’s infrastructure.

Breaking the mould
Describing the thinking behind the concept, Arbeed , says: “It’s a unique idea that is similar to the industrial cities all over the world but with some uniqueness in terms of the fact that it partners exactly with today’s needs. Sustainable development – is the key to the distinction between Gas City and other industrial cities. What we are trying to build for the countries of the MENA region is cities whereby you can use the whole gas cycle. You can do this by supplying gas to petrochemicals and other industries, those are what we call the primary industries. Then there are the secondary industries which take the waste and emissions from the primary industries and use this as feed to make many products of different kinds.” As well as industrial facilities the projects will also include the infrastructure needed to support the workers that will live within the Gas City compound, Arbeed explains: “We will have tertiary services that will provide services to the whole city, which includes the residential area.”
Arbeed goes on to say that although Gas City breaks the mould in terms of modern natural gas production facilities, it is inspired by the era of the European industrial revolution in the 19th century, during which whole towns and cities sprung up around factories and other industrial sites: “This idea goes back 200 or 300 years,” says Arbeed. “As soon as industries started to grow, the cities came as a by-product because people move closer to the area where they worked. We’re trying to set an example of how this can be done in the Middle East and in a sustainable idea.”

To date Dana Gas, which is an affiliate of UAE based Crescent Petroleum, plans to build four gas cities across the Middle creating “tens of thousands of jobs” in the region. It has already been in talks with the Egyptian government about building one of the first Gas City complexes in the country, where it already has a strong presence since acquiring Centurion Energy for US$1billion in 2007.  Plans are also afoot to build a 461 million square foot site for Kurdistan Gas City. Dana Gas has been supplying the Iraqi region of Kurdistan since late last year after completing a US$650 million project. The Kurdistan Gas City project will be build with an initial investment of US$3 billion and is expected to attract foreign direct investment of over US$40 billion during the operations phase. It will be built to support over 20 types of petrochemical and heavy manufacturing plants and hundreds of small to medium enterprises. If successful, the company believes it could spurn several other similar projects across the Iraqi region – with Majid Jafar, executive Director of Crescent Petroleum already having told Reuters last year that it has received interest from local authorities in Anbar in the west and Basra in the south.

The road ahead
The scope for Gas Cities and the numbers involved are highly impressive – but they remain, for now, a reality only on paper. No firm dates have been set for the completion of the first project as the economic downturn casts a shadow over Dana Gas’ ambitious plans, which rely for their success on heavy investment by regional governments.

When asked when the first gas city will be built, Arbeed replies,: “It is very difficult to judge really, especially with the (economic) crisis now, because we’re not going to build the gas cities alone. There will have to be contractors and owners of the petrochemical companies and we will have partners with us. We will open the floor to investors because these projects are going to cost billions of dollars. It’s a huge investment and at this stage of course, very few investors will be ready to invest unless the situation in the market continues to improve. But we will always keep the idea live and we continue to talk to countries about it. We will take the appropriate time to move it quickly and build.”

Dana Gas’ success in the wider natural gas industry ensures however, that while the Gas Cities project may be on hold for now its future in the regional gas industry is bright. In 2007, the company’s first year of operation, it reported revenue in excess of US$1 billion and in the first nine months of 2008 it reported a surge in profits of US$245 million. It’s investment in Kurdistan is set to reap particularly high rewards for the company as it is on target to provide 1,250 megawatts of electricity to over four million Iraqi citizens through gas supplied to two new power plants that are under construction in Erbil and Sulymaniya.  Construction is complete on 180 kilometres of natural gas pipeline and two LPG plants carried out jointly by Dana Gas and Crescent Petroleum and the entire project will deliver over 300 million cubic feet of gas by the end of this year.

Speaking about the company’s success in Iraq and what it means for the people there, Arbeed, says: “We were asked by the government of Kurdistan to come and invest in two fields and to build an LPG to knock down the liquids and take the gas through a pipeline of 180 kilometres in length all the way to the north of the region to Erbil city. We did that in 15 months, which was amazing and was world standard for a project like that. It usually takes two and a half years or maybe three years before you see gas flow. As a result of our project electricity availability to citizens increased from two hours a day to 22 hours a day.”

Widening the scope
The company has achieved great success in Egypt since its acquisition of Centurion, and has recently announced the discovery of new wells in the southern part of the country and plans to invest over US$175 million in drilling 19 new exploration wells there.

“After we acquired Centurion we really focussed our efforts on Egypt and managed to double up the reserve last year. We made five discoveries in a very short period of time and we built up our reserve of gas in Egypt to double what we started with when we acquired the company. We still think that our acreage in Egypt has got a lot of resources and we are continuing to explore for more gas. We think that we can add the same volume again to our reserves there.” Dana Gas now hopes to emulate these success stories in other parts of the Middle East, including the UAE, where it is in phase one of a joint pipeline project with Emarat, which will eventually deliver one billion cubic feet of gas to the Hamriyah Free Zone in the emirate of Sharjah. The authorities there have also earmarked 50 square kilometres of land for a Gas City complex. Describing the company’s regional expansion plans, Arbeed says: “We are focussing on a number of different countries in the region, of course. We start with the Gulf region and then we will move onto North Africa, especially Algeria and Libya. We also plan to focus a little bit on parts of South Asia, like Bangladesh and Parkistan. We are continuing to review our plans and will add countries as and when we feel its necessary.”

But Dana Gas’ projects in the Middle East are just the start of a five-year expansion strategy, which it hopes will take it onto the global energy stage. The company, along with Crescent Petroleum, was part of a group that had planned to pump gas from Kurdistan via Turkey to Europe through the US$10 billion Nabucco pipeline, alongside Austria’s OMV and Hungary’s MOL. The plan was rejected by the Iraqi government however and its future is now uncertain.
Arbeed says he is confident that the firm’s international expansion plans won’t be affected by the economic downturn – given the strength of the Dana Gas business model and the relative stability, he says, of gas prices: “In terms of financials we’re ok and we will continue with our growth strategy. We are less affected (by the financial downturn) because our revenues come from gas. The gas we’re working on in Egypt for example, has a fixed price. So even if the price of oil goes up or down, this will not affect our price much.” Is it this sort of optimism that has allowed Dana Gas to go from nothing to one of the region’s leading natural gas suppliers in the space of just two years. And as the world’s search for alternative energy sources picks up pace, demand for its natural gas products looks set to catapult it to future success.

People power
Ahmed Arbeed on how Dana Gas’ international workforce has helped to contribute to its success.

“We recruit people not only from the region but from all over the world. If you look at the Dana Gas management there are eight people at the high level of management and they come from eight different countries. The COO is originally from Iraq but has UAE nationality. We have two from the UAE, I’m from Kuwait, and then the others are from Egypt, Britain and India. They bring exposure to different industries within the oil and gas industries. So we are gaining a lot of benefits from having an international workforce.

Safety first
Ahmed Al Arbeed on health, safety and the environment (HSE) at Dana Gas.

“We need to focus more on HSE but we have noticed in the past year, there are a lot of improvements in this area. We are adopting methodology to implement HSE across our operations and this has so far proven successful.

I believe that once you focus on HSE you find that the performance of the whole operation is improved. Once you adopt the best practice in this respect, this is a good methodology to improve operations and gain more revenue and profits. That will add value to the business of Dana Gas.”

State of play
Dana Gas Executive Chairman Hamid Dhiya Fafar, speaking at the latest Dana Gas AGM, outlines the company’s expansion plans for year ahead.

The natural gas sector continues to show extremely strong fundamentals despite the global recession. The MENASA region is unquestionably the world’s largest player in hydrocarbon supply, with 45 percent of global gas reserves yet less than 20% of its supply. Additionally the robust economic growth in recent years has transformed the region into a major gas market in its own right with an estimated long term annual growth rate of between six and seven percent. This positive long-term view of our industry has been enshrined in our robust five-year business plan and strategies within our region.  Our goals for 2009 are to reach even greater heights than in 2008; they will undoubtedly be challenging, but we nevertheless look forward to achieving them.”