ABU DHABI AWARE OF SHARJAH AND IRANIAN GAS

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 003440

SIPDIS

DEPT FOR NEA/ARPI, EB/ESC/TFS, EB/ESC/IPC
WHITEHOUSE FOR OVP - KEVIN O'DONOVAN

E.O. 12958: DECL: 08/08/2015
TAGS: EPET ENRG ECON PREL IR TC
SUBJECT: ABU DHABI AWARE OF SHARJAH AND IRANIAN GAS

REF: ABU DHABI 3237

Classified By: Ambassador Michele J. Sison for reasons 1.4 (b & d)


1. (U) This is an action request. Please see para 9.


2. (C) Summary: Abu Dhabi Executive Council member Khaldoon
Al-Mubarak told Econchief that Abu Dhabi emirate leadership
was aware of the planned Crescent petroleum project to pipe
Iranian gas to the UAE and was trying to develop an
appropriate solution. Al-Mubarak noted the sensitive nature
of the UAE's relations with Iran, which occupies three
islands claimed by the UAE, including one claimed by the
Emirate of Sharjah. Crescent Petroleum, which allegedly
signed the deal with Iran, announced the formation of a new
company Dana Gas (and a planned IPO) to handle the gas
imports. Although the press has widely reported that the
source of the gas is Iran, Crescent has never publicly
confirmed the source of the gas. The project would involve
piping gas from Iran's Salman field to an offshore facility
in Sharjah. The gas would be brought into the UAE for use in
the country's northern emirates. Al-Mubarak stressed that
there was no Abu Dhabi emirate government investment in the
project. Local press reporting provides more detail on the
creation of Dana Gas and its planned IPO. End Summary.


3. (C) On July 26, Econchief raised the Dana Gas IPO with Abu
Dhabi Executive Council member and Mubadala CEO Khaldoon
Al-Mubarak. Al-Mubarak clearly expected the conversation,
noting that it was clear that there was a relationship
between Crescent Petroleum and Iran. Al-Mubarak said that
senior Abu Dhabi emirate officials were "aware of the
situation" and trying to come up with an appropriate
solution. Econchief stressed U.S. concerns about investments
in the Iranian oil and gas sector. Al-Mubarak admitted that
he had thought that they had successfully shut down the
project but that it "was still very much alive."


4. (C) Al-Mubarak explained that the Crescent deal with the
Iranian National Oil Company would involve piping gas from
Iran's Salman field (shared with the Emirate of Abu Dhabi) to
Crescent's offshore Mubarak platform. The gas would be used
in the northern emirates. Al-Mubarak stressed that no gas
was flowing and that there was no Abu Dhabi government
investment in the project.


5. (C) Al-Mubarak reiterated that the position of Abu Dhabi
emirate leaders was that any decision to sign an
international oil or gas deal is a federal decision. He
emphasized, however, that the emirate of Abu Dhabi had a
"complicated" and "sensitive" relationship with both Iran and
the emirate of Sharjah: A relationship that needed to be
managed carefully. (Note: The emirate of Sharjah claims the
-- Iranian occupied -- Abu Musa Island. Sharjah's ruler is
also known for his -- relatively -- conservative Islamic
beliefs and ties to Saudi Arabia. End Note.)


6. (U) The UAE press has provided a number of details
regarding Crescent Petroleum and the Emirate of Sharjah,s
planned initial public offering (IPO) of Dana Gas in
September. The new company, Dana Gas, will undertake the
Sajaa Gas Ltd. (Sajgas) project to pipe gas to the UAE.
(Note: Although the press has reported that this will be
Iranian gas, Crescent has not publicly confirmed the source
of the gas.) Dana Gas will be capitalized at 6 billion
dirhams ($1.63 billion). Dana Gas will also be the region,s
first private sector gas resource company to have a public
listing, when trading begins on the Abu Dhabi Stock Market
following the IPO.


7. (U) The IPO will be for 35 percent of the new business,
or $572 million. Of the remaining 65 percent, the original
founders will hold 32.7 percent ($534 million). These
original founders include Crescent Petroleum, the government
of Sharjah, Bank of Sharjah and individuals from the Gulf
region. The other 32.3 percent ($528 million) will go to new
founding investors, &comprising reputable institutions,
companies and individuals from all over the Gulf, building
upon the growing spirit of private sector cooperation and the
increasing trend for cross-investment across the region,8
according to a press statement. The Memorandum and Articles
of Dana Gas stipulate that at least 51 percent of the company
must be owned by GCC citizens, allowing foreign ownership of
up to 49 percent.


8. (U) Dana Gas will fully merge Sajgas and the United Gas
Transmissions Company, both currently held by Crescent
Petroleum, the Sharjah government and other founding
investors. Dana Gas will also take a 35 percent share of
Crescent Natural Gas Company, of which Crescent Petroleum
will hold onto a 65 percent share. Dana Gas expects its
initial customers to include federal, Sharjah, and Dubai
utilities providers, Dubai Gas Company (Dugas) and the Dubai
Supply Authority. Dana forecasts first-year 2006 profits to
be $73 million for its gas supply business, according to news
sources.


9. (C) Action Request: Embassy and ConGen Dubai would welcome
cleared language from the Department for use with the UAEG
and the ruler of Sharjah as we attempt to convince them to
stop this unwelcome project. Given the September timeline
for the Dana IPO, the window of opportunity appears limited.
SISON