SAJGAS IPO AND IRANIAN GAS

C O N F I D E N T I A L ABU DHABI 003237 SIPDIS DEPT FOR NEA/ARPI, EB/ESC/TFS, EB/ESC/IEC E.O. 12958: DECL: 07/20/2015 TAGS: EPET BEXP ENRG ECON PREL IR TC SUBJECT: SAJGAS IPO AND IRANIAN GAS REF: A. ABU DHABI 634 ¶B. DUBAI 265 AND PREVIOUS Classified By: Ambassador Michele J. Sison for reasons 1.4 (b and d) ¶1. (U) This is an action request. Please see para. 5. ¶2. (C) Dow Jones Correspondent Simeon Kerr (protect) telephoned EconChief on July 23 and July 24 to say that Crescent Petroleum and the Emirate of Sharjah planned to issue an initial public offering (IPO) in September for their SajGas project to pipe Iranian gas to the UAE. According to Kerr, the IPO will be for a 32 percent stake in a new company that combines the assets of the pipeline, gas processing, and gas provider. Crescent Petroleum will be the lead investor in this new company (to be named Dana Gas). Other investors include Kuwaitis, Saudis, Abu Dhabi and the Bahraini royal court. Kerr said that Crescent is "bringing on board" important and influential investors to ensure that the project can go through. Kerr added that the IPO would be open to foreign investment. The lead arranger for the IPO will be HSBC. ¶3. (C) According to Kerr, the IPO is still very "hush hush" out of concern for U.S. opposition to any investments in Iranian gas, but he "had seen papers" describing the proposal. Kerr said that the deal makes economic sense for Dubai and the northern Emirates. It diversifies the source of supply, will be available before Dolphin gas from Qatar, and will be very "cheap." Kerr also speculated that the Abu Dhabi leadership's opposition to the project had been overcome when the Emirate of Dubai contracted to buy Dolphin gas. "Dolphin's equities (and by extension Abu Dhabi's equities) are being taken care of" now the project can move forward. ¶4. (C) Comment: The UAE demand for energy is increasing rapidly with the growing population and economic development plans. Crescent's SajGas project is a multi-million dollar project to bring gas to the northern emirates. This project appears to be moving forward despite the Abu Dhabi leadership's long standing stated opposition. In February, MinEnergy Mohammed bin Dha'en Al-Hamili told us that the UAEG had a contract with Crescent Petroleum to purchase gas from the offshore Mubarak field, but stressed that the UAEG had signed a contract to purchase gas from Sharjah, not Iran. (ref A) The problem, he explained, is that the Mubarak field, which lies near the Iranian controlled, and UAE claimed Island, of Abu Musa, is shared by Iran and Sharjah and Crescent's concession crosses into Iran. (Note: Each emirate in the UAE controls it own oil and gas resources.) Crescent's silence gives Sharjah and the UAEG a certain amount of "plausible deniability." End Comment ¶5. (SBU) Action Request: Post requests updated points that we can use both with UAEG and Sharjah emirate authorities to express our concern and we seek more information at the federal and Sharjah emirate level. End Action Request. SISON