Dana Gas posts loss on Egypt

Tamsin Carlisle

• Last Updated: November 12. 2009 10:24PM UAE / November 12. 2009 6:24PM GMT

Dana Gas swung to a third-quarter loss of Dh79 million (US$21.5m) due to one-off costs related to its oil and gas exploration programme in Egypt.

The latest results for the company based in Sharjah compared with its profit of Dh26m for the comparable period of last year.

Nevertheless, Dana posted a 12 per cent increase in revenues to Dh359m for the latest period from Dh320m a year earlier, which it attributed to new sales of condensate from its operations in Iraqi Kurdistan. Condensate is a type of light oil produced from gasfields rich in suspended liquids.

“Overall, we are pleased with the underlying results, reflecting strong performance from across the company,” said Ahmed al Arbeed, the chief executive.

Dana’s results for the quarter included Dh110m of write-offs and impairment charges related to three wells it drilled in Egypt that failed to find commercial quantities of gas.

But Mr Arbeed predicted the company’s output from the North African country would increase to 40,000 barrels of oil equivalent per day (boepd) by the end of this year, from about 37,000 boepd reported last month, following a string of gas discoveries earlier this year.

Dana’s Kurdish condensate sales establish a long-awaited second revenue stream for the company. Previously, almost all its revenue came from sales of Egyptian oil and gas.

Dana and its affiliate, Crescent Petroleum, a privately owned Sharjah oil and gas developer, have been pumping gas from the Khor Mor field in Kurdistan since October last year. But under their agreement with the Kurdish regional government, they supply gas free of charge for local power production.

Earlier this year, the partners sold 10 per cent of their Kurdish project to two European petroleum companies – OMV of Austria and MOL of Hungary – with a view to developing gas exports from the region.

However, that scheme must overcome formidable political hurdles to be realised, among them an impasse over resources jurisdiction between the Kurds and Iraq’s central government that recently led to the suspension of Kurdish oil exports.

Even so, Dana and Crescent, which is Dana’s biggest shareholder, have scope to expand local sales of condensate and other liquids they plan to extract from Kurdish gas. The companies were making progress with building a plant to produce liquefied petroleum gas, Mr al Arbeed said.

Another big project for Dana appears to be indefinitely on hold. That is the company’s plan to market Iranian gas that was to be imported to the UAE through an undersea pipeline, which Crescent completed more than three years ago. However, the National Iranian Oil Company (NIOC) has so far failed to start the gas deliveries pledged under a contract it signed with Crescent in 2001.

“Crescent Petroleum served NIOC with an arbitration notice several months ago and due legal process is underway,” Dana said in the directors report accompanying its third-quarter financial statement.

Dana’s shares closed yesterday on the Abu Dhabi Securities Exchange at Dh1.12, down 3 fils.

tcarlisle@thenational.ae