Dana Gas has inked a deal to develop an offshore gasfield shared by the emirates of Sharjah and Ajman.
The company hopes to produce gas within the first half of 2014 in the field located about 40 kilometres off the coastline. It is Dana’s first exploration and production project in the UAE.
“The produced gas will be used mainly for power generation, which will make significant savings in fuel cost,” said Rashid Al Jarwan, the executive director and acting chief executive at Dana Gas.
Sharjah is short of natural gas, the region’s primary feedstock in the generation of electricity, and the emirate has experienced repeated power outages in recent summers. A Dana project intended to address the shortfall by importing gas from Iran via a pipeline has so far failed to materialise.
The news follows months of speculation over Dana’s financial health, which culminated in its failure to repay a US$920 million (Dh3.37 billion) sukuk that expired last month. Dana reached a preliminary agreement with creditors to restructure the sukuk, the company said on November 7. Bondholders are set to receive a mix of cash and two new bonds, one of which will be convertible into shares.
The cash repayment will total $100m, Bloomberg reported yesterday. The board met on Sunday to discuss progress on the restructuring, according to an Abu Dhabi Securities Exchange filing.
The sukuk is backed by the Iran gas import scheme, as well as by existing assets in Egypt. Analysts say the collateral underpinning the bond is not sufficient to make a liquidation attractive to investors.
Outside Egypt, Dana’s main operations lie in Iraqi Kurdistan, where the company says it produces the equivalent of up to 80,000 barrels of oil per day. In both countries, payment issues have blighted Dana’s finances and prevented it from accumulating the funds to pay back the sukuk’s principal.
In Egypt, the political upheaval of the Arab Spring has led to intermittent payments to gas producers, while Egypt’s government is struggling to afford heavy subsidies on domestic gas sales.