No one can accuse Dana Gas of being risk-averse.
The Sharjah-based company has made its core investments in countries that have suffered through extreme turmoil in the recent past, events that still have a heavy affect on the oil and gas industry there.
Dana was one of the first to brave the uncertainties of hydrocarbon production in the Kurdish region of Iraq, a bold decision that played havoc with its finances, as friction between Erbil and Baghdad reduced payments for its gas to a trickle.
Dana's penchant for engaging in markets scarred by political conflict nearly led to disaster, as it found itself unable to repay the principal on a US$1 billion sukuk that matured last October. With insufficient payments out of Egypt and Kurdish Iraq and capital markets that were reeling from the European debt crisis, the company was left scrambling to refinance the debt lest it default on the sukuk.
"We had those… things at the same time: delays of receivables of over $500 million, combined with weakened capital markets, which meant that you couldn't refinance," says Majid Jafar, the managing director of the board of Dana Gas and the chief executive of Crescent Petroleum, the largest shareholder in Dana.
The sukuk saga was finally concluded last month, when shareholders approved the refinancing. Dana issued two bonds to replace the sukuk, one of which is convertible into shares. It also repaid $70m of the principal. Mr Jafar says that Dana has no plan to raise further debt.
The payment situation had begun to improve even before the sukuk had been refinanced, as revenues starting flowing in from Egypt and the Kurdish Regional Government (KRG). Net profits last year stood at $165m, an increase of 20 per cent.
Dana is still owed about $230m by the Egyptian government, said Mr Jafar, mainly for gas deliveries made during the upheavals of the Arab Spring in 2011.
In Kurdish Iraq, the company received $48m last year after Baghdad agreed to release about $1bn to the KRG for payments to energy companies active in the region.
Iraq's central government regards the oil contracts between semiautonomous Kurdish Iraq and international companies as illegal and has withheld the bulk of revenues producers in the region are owed.
With its finance issues resolved, Dana Gas can focus on the business of getting gas out of the ground.
The recent payment problem has not discouraged Dana from further investment in its core markets.
The company last month announced it had successfully bid for a new exploration block in Egypt's Nile Delta and expects to be granted a concession for the field later this year.
Dana is also looking to increase its production in Kurdish Iraq beyond the current 350 million cubic feet per day (cf/d) of gas plus 15,000 barrels of condensate, and is in negotiations to almost double the gas component to 600 million cf/d.
The gas is used in power plants that provide the Kurdish region with regular electricity, a luxury considering that power is rationed in the rest of the country.
This is not the first time Mr Jafar's family has been involved in bringing electricity to the Kurds. The two plants that received Dana's gas were the region's first to become operational "since 1958, when my grandfather as the Iraqi development minister inaugurated the hydroelectric dams in the Kurdistan region with King Faisal II", says Mr Jafar.
Mr Jafar's family left Iraq that year after the monarchy was overthrown by a military coup.
Dana and its parent company, Crescent, each hold 40 per cent stakes in the Khor Mor and Chemchemal fields. They had to rely on inexperienced local contractors and go to great efforts to import material and machinery to develop the Kurdish gasfields, and Mr Jafar is proud of the speed with which the fields started producing gas after a concession was granted in 2007.
"We went from signature to first gas in 15 months. Speaking to friends at western majors, they said they wouldn't have finished planning it in 15 months," he says.
Kurdish Iraq is one of the last remaining oil frontiers, and Mr Jafar believes that Dana's ability to outpace the big international oil companies (IOCs) is symptomatic of the industry at large.
"The large, integrated IOCs have been struggling," he says. "The size was created in a $9 a barrel world, to optimise costs and make money in the downstream."
ExxonMobil, the first of three oil majors to enter Kurdish Iraq, will finally start drilling exploration wells this year after signing deals with the KRG in November 2011. The other two majors in the region, Total and Chevron, are still some way off from producing oil in the region.
Majors are struggling to replace their reserves, and they can easily become political targets because of their size and geographical reach, says Mr Jafar.
"You need to be nimble, locally sensitive; relationships are important. The technology is with the service companies, by and large, but the project management skills are very important in this sector."
The small, independent players have driven the recent transformation of the natural-gas sector. Gas production has undergone revolutionary change as hydraulic fracturing, or fracking, has made gas caught in shale rock formations accessible.
As a result, gas production in North America has surged, pushing down prices and boosting the economic fortunes of the United States.
As a relatively clean fossil fuel, and with new extraction techniques dramatically increasing reserves, gas is quickly gaining in importance to hydrocarbon producers. Power plants running on gas produce far less emissions than coal-fired plants, and demand for gas in the petrochemical and metals industry is insatiable. A small but growing proportion of cars around the world are run on compressed natural gas.
"If coal was the fuel of the 19th century, and oil the fuel of the 20th century, there is no doubt that natural gas is the fuel of the 21st century," says Mr Jafar.
Wasteful use of electricity, growing cities and a burgeoning petrochemical industry have left the Middle East facing a gas shortfall. Subsidies on gas and electricity that are common in the region are encouraging excessive consumption and leave governments struggling to meet demand. Mr Jafar believes that subsidies should be reined in, which would have the additional advantage of freeing up capital for investment in gas resources.
"Only when consumers feel that they are paying the true value of the energy do they adjust their consumption accordingly."
Surging gas demand in the Middle East has led to a renewed emphasis on production, and Dana is keen to broaden its regional footprint. In keeping with its current projects, the company has not shied away from political risk, and is among the 34 companies that have been pre-qualified for offshore gas concessions in Lebanon.
Lebanon is part of the Levant basin that holds vast reserves under the deep seabed. Production is already under way off the shores of Israel, and cash-strapped Cyprus and Greece are desperate to tap their gas potential.
Dana is not the only UAE company that is waiting to submit bids to the Lebanese government in November. Crescent, Dubai's Dragon Oil and Mubadala Petroleum are also pre-qualified and hope to win one of the concessions that are scheduled to be awarded next year.
Lebanon's chronic political instability could delay the process, however, after the government that issued the tenders collapsed in March and a provisional government took charge.
Dana is also closing in on gas reserves closer to home and is preparing the development of the offshore Zora field that straddles the maritime borders of Sharjah and Ajman.
Preliminary engineering work is being done, and construction contracts will be awarded soon, says Mr Jafar. The field is expected to produce 60m cf/d.
Plans to import gas from Iran via a pipeline have not come to fruition, even though most of the infrastructure is in place. An ambitious project set against a complicated political backdrop, the scheme fits in nicely with Dana's existing projects.
It is unlikely to be the last of its kind.