TBY talks to Badr Jafar, Managing Director of Crescent Group, on the group's activities, relationships between the companies, and challenges in the sector.

Badr Jafar
Badr Jafar is Managing Director of the Crescent Group, a private family business headquartered in the UAE for over 42 years. He is also the Chairman of Gas Cities, Pearl Petroleum Company, and sits on the Board of the International Advisory Board of Dana Gas. Jafar is also involved in other industries, including the aviation sector as a Board Member of Gama Aviation (UK); ports and logistics as Vice-Chairman of Gulftainer; real estate as a Board Member of Enshaa PSC (UAE); and private equity as a Board Member of The Abraaj Group (UAE) and GrowthGate Capital (Bahrain).

Describe the overall activities of the Crescent Group and its various subsidiaries?

Crescent Group, established 42 years ago out of Sharjah, is one of the most progressive business groups in the region, operating through more than 25 companies and subsidiaries across the energy and non-energy sectors. To promote world-class corporate governance processes and to generate synergies between our companies, we have instituted two specific verticals: energy and non-energy. Within our non-energy portfolio, our holdings are all formally amalgamated under the Crescent Enterprises umbrella, which operates in eight diverse business sectors: ports and logistics, healthcare, aviation, power and engineering, private equity, technology, and media and entertainment. Crescent Enterprises looks to build profitable, sector-leading companies, which are also responsible citizens throughout the region and the wider world. Within the energy portfolio, our flagship entity is Crescent Petroleum, the region's first and largest independent, privately owned upstream oil and gas company. Other companies in the energy portfolio include our 20% shareholding in Dana Gas, 40% shareholding in Pearl Petroleum, which is a regional partnership with Dana Gas, OMV of Austria, and MOL of Hungary, which is used for gas resource and infrastructure development in the Kurdistan region of Iraq, and a 50% stake in Gas Cities, which is working on the creation of a gas-based industrial hub partnership with Saudi Arabian Construction Products Company International, a subsidiary of the BinLadin Group.

What is the relationship between Crescent Petroleum and Dana Gas, and will the sukuk restructuring at Dana Gas affect Crescent Petroleum?

Crescent Petroleum was a key founder of Dana Gas in 2005 along with other core founders when it was launched as a new public company on the Abu Dhabi Stock Exchange. The company is independently run with a prominent board of directors and capable management. It is the only publicly listed private sector natural gas company in the Gulf region today, and it has active operating interests in the UAE, Egypt, and Iraq. Crescent holds approximately 20% of the shares of Dana Gas and is, therefore, its largest single shareholder. As with any significant shareholder in any company, we are well represented on the board of the company and always strive to maintain a very constructive relationship. It is important to emphasize, though, that we operate fully independently of one another. Of the many projects that Crescent Petroleum and Dana Gas are pursuing, only two projects are being executed in partnership, and that is our large project in the Kurdistan region of Iraq and our downstream joint venture Gas Cities.

What are the challenges facing the UAE's oil and gas industry?

The GCC states currently produce about 16.3 million barrels of oil per day, with the UAE accounting for about 2.7 million barrels per day alone, about 18% of global oil demand. These countries account for 30% of global proven oil reserves, the UAE on its own accounts for about 6%, so they have the potential to produce much more. However, with liquids production rising from nothing to around 2 million barrels per day in only a few years as a result of tight oil in North America, and with the potential for further output increases elsewhere in countries such as Brazil, the ability of the Gulf region to increase its output without putting downward pressure on prices is likely to be constrained for some time to come. As for gas production, it is a well-known fact that our region does not produce as much as it needs to ensure a fully efficient domestic energy economy, with gas production limits restricting power output or leading to the burning of oil to meet peak power demand. To put things into perspective, the region holds over 45% of the world's remaining gas reserves, but produces less than 14% of world production. Therefore, the region's gas resources, like its oil resources, are abundant with current proven gas reserves able to maintain current production levels for over 120 years. For the region to realize its full gas output potential, there needs to be a realignment of economic incentives to ensure that subsidies do not make it uneconomic to explore for and develop new gas resources.

“The GCC states currently produce about 16.3 million barrels of oil per day, with the UAE accounting for about 2.7 million barrels per day."