IRAN-LIBYA SANCTIONS ACT (ILSA): DANA GAS: EXISTING

C O N F I D E N T I A L SECTION 01 OF 02 DUBAI 006919

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/7/2016
TAGS: PREL PGOV ECON ENRG EPET IR AE
SUBJECT: IRAN-LIBYA SANCTIONS ACT (ILSA): DANA GAS: EXISTING
INFRASTRUCTURE AND EXPANSION PLANS

REF: A. A. 05 DUBAI 4987

B. B. 05 DUBAI 0265

C. C. DUBAI 0857

D. D. DUBAI 2819

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CLASSIFIED BY: Paul R Sutphin, Consul General, Dubai, UAE.
REASON: 1.4 (b),(e)



1.(C) Summary: Dana Gas General Manager Rashid Saif Al-Jarwan
told PolEconoff and IRPoff November 28 that Dana Gas'
subsidiary, SajGas, has completed its Sajaa Gas Sweetening
Facility -- purpose-built to process Iranian gas. The only
remaining requirement for operation is gas from Iran. Dana Gas
is fully aware of USG opposition to the UAE and UAE-based
entities entering into petrochemical contracts with Iran. Dana
Gas -- a publicly traded company based in Sharjah -- plans to
expand through mergers and acquisitions, such as the recent
buy-out of the Canadian company Centurion (some 300 employees),
as well as through new local projects in the GCC and Iran. Dana
Gas has roughly 10 employees devoted to running the company and
a five year agreement with Crescent Petroleum for every related
support service (from facilities to IT and engineering
expertise). End Summary

Dana Gas Background and Leadership
--------------

2.(SBU) Rashid Saif Al-Jarwan, the General Manager of Dana Gas,
spoke with PolEconoff and IRPoff on November 28 at the company's
Sharjah headquarters about company goals and UAE-based
infrastructure. Al-Jarwan, a 1977 Pennsylvania State University
graduate, was the General Manager at Abu Dhabi Gas Liquefication
Co. (ADGAS) for eight years before joining Dana Gas last year.

3.(SBU) Dana Gas has 400,000 shareholders. The Government of
Sharjah, while one of the "core founders" of Dana Gas, owns only
around one percent; other core founders include banks,
businesses and individuals from throughout the Emirates (24
percent),Saudi Arabia (20 percent),and other GCC states (20
percent). The October 2005 IPO represented the final 34.3
percent (ref A). Al-Jarwan said Dana Gas has roughly 10
employees devoted to running the company and a five year
agreement with Crescent Petroleum for technical and support
services -- running the gamut from facilities management and IT
to engineering expertise. Crescent Petroleum is Dana Gas'
majority shareholder. Al-Jarwan stressed the importance of Dana
Gas' board of directors and its international advisory board.
He believes the boards bring significant power and knowledge to
the table -- including former Kuwaiti oil minister Dr. Adel
Khalid Al Sabeeh (board of directors) and previous BP CEO Lord
Simon Highbury (international board).

Dana Gas Expansion Plans
--------------

4.(SBU) Al-Jarwan said Dana Gas plans to expand in two ways,
first through mergers and acquisitions and then through what he
termed "organic growth." In mid-November, the company announced
the acquisition of Calgary-based Centurion Energy International
Inc. Al-Jarwan gave three reasons for purchasing Centurion: to
acquire its ongoing production assets; its exploration rights in
Egypt, Nigeria and Tunisia; and most importantly, the more than
300 Centurion employees -- including geologists, engineers and
other specialists. The additional staff will boost in-house
expertise. He also discussed the early October purchase of a
controlling stake in a Bahraini-company now called Danagaz. The
company will work with the state-owned Egyptian Natural Gas
Holding Company to extract liquid petroleum gas from Egypt and
sell it internationally.

5.(SBU) Dana Gas plans to expand in the region in a methodical
manner. The first "organic" Dana Gas office to open in the GCC
will be in Khobar, Saudi Arabia. Al-Jarwan claims Dana Gas
wants to first "participate" regionally, and eventually build to
a size that can compete with major international gas firms. The
company is seeking projects in Saudi Arabia, Qatar, Kuwait,
Yemen and Iran.

Gas Project with Iran
--------------

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6.(C) Dana Gas' subsidiary, SajGas, has built the Sajaa Gas
Sweetening Plant in Sharjah -- a purpose-built facility for
processing Iranian gas. Although Al-Jarwan was willing to speak
about UAE-based infrastructure, he would not discuss Iran and it
was clear he understood the USG position on the deal. The plant
and all related infrastructure are complete. The only remaining
requirement for operation is gas from Iran. Gas will be piped
from Hamriya port to the facility, where it will be "sweetened"
-- processed to remove sulfer and other impurities, resulting in
pure, dry methane -- and then sold domestically or abroad, for
the greatest profit. When pressed, Al-Jarwan said the company's
plan could be modified to receive gas from elsewhere, but no
such plans exist or have been considered. Al-Jarwan did not
offer information about the plant's capacity. Previous
estimates from a BP official -- BP operates a plant processing
all of Sharjah's petroleum products next to SajGas -- suggest
the plant will be capable of sweetening 600 million standard
cubic feet of gas per day at full capacity (ref B).

7.(U) Local media has closely tracked the peaks and valleys of
the gas deal with Iran (refs C,D). Despite the August visit of
a technical delegation from the National Iranian Gas Exporting
Company to SajGas and a Dana Gas announcement in October that it
would begin importing gas from Iran during the first three
months of 2007, no progress is apparent. Iranian officials
immediately denied Dana Gas' October 4 statement, indicating
that the two sides had not reached an agreement on the price of
the gas. On October 16, the English-language daily Gulf News
reported "final negotiations" would be held the following week
with Dana Gas accepting Iran's new price demands. No further
information has been released.

Comment
--------------

8.(C) The meeting with Al-Jarwan was cancelled by Dana Gas two
times before a same day request was floated by Al-Jarwan's
office. While willing to discuss generalities, Al-Jarwan was
circumspect in providing details and when asked to facilitate a
visit to the SajGas plant, suggested off-roading in the desert
area to get a look instead. A previous request for a meeting
with the SajGas plant general manager by PolEcon Assistant was
met with a derisive rebuke. Dana Gas is fully aware of USG
concerns and opposition to the UAE and UAE-based entities
entering into long-term petrochemical contracts with Iran -- as
is the UAE government and individual Emirate governments.

9.(U) This message has been cleared with Embassy Abu Dhabi and
IRPO.
SUTPHIN