Offshore Technology

Daily Newsletter

10 August 2023

Daily Newsletter

Dana Gas net profits drop, cites issues with Iraq’s Kurdistan region

After struggling to make punctual payments for more than a decade, the Kurdistan Regional Government in Iraq paid around $80m to Dana Gas.

Natural gas company Dana Gas has announced a drop in net profits in the first half of 2023, citing “additional discounts on condensate sales” in the Kurdistan region of Iraq (KRI).

“The impact of lower realised prices on the company’s profitability was partially offset by a production increase in the KRI and reduced operating costs by 15%,” the company said.

Based in Sharjah, United Arab Emirates (UAE), the company generated a net profit of almost $83m (Dh304m) as compared to almost $111m in H1 2022.

The average price of Brent crude oil dropped 25% during H1 2023 to $80 per barrel compared with $107 per barrel in H1 2022. The company made around $222m compared with almost $284m in revenue, a 22% decline due to “lower realised prices amid the softening global oil and gas prices”.

Patrick Allman-Ward, CEO of Dana Gas, said: “Dana Gas’s first-half results reflect the challenging environment hydrocarbon producers have been facing amid a decline in global oil prices.

“To counter the downturn in energy prices, the company has strengthened its focus on maintaining production and lowering costs while working with partner governments in Egypt and the KRI to settle outstanding payments,” he added.

The company said in the report that it had received $82m from the KRI, which had struggled to make punctual payments for more than a decade. Pearl Petroleum, a consortium majorly owned by Dana Gas, received $101m from the Kurdistan Regional Government (KRG) “despite the ongoing challenges within Iraq and is in ongoing discussions with the KRG to settle outstanding receivables as soon as possible”.

Dana Gas had to sell to third-party local buyers as other companies shut down production in the KRI. Only Pearl’s operations were uninterrupted since all the products were consumed locally.

The Dana Gas group received a total of $106m during H1 2023, including $82m from the KRI and $26m from Egypt. Egypt and the KRI owed the company around $41m and $97m, respectively, at the end of June.

The company’s production declined by 2% within the first of the year to 59,800 barrels of oil equivalent per day. Egypt’s production outweighed a 5% increase in the KRI, with a 12% drop due to natural field declines.

ESG 2.0 marks a shift towards stricter environmental rules

ESG is moving into a different era, which we call ESG 2.0. While ESG 1.0 was driven by voluntary corporate action, spurred by pressure from activist consumers and investors, ESG 2.0 is being driven by a new wave of government policies. The EU has taken the regulatory lead, with rules introduced or in the pipeline that will price emissions, regulate the use of the terms ‘ESG’ and ‘sustainability’ in marketing materials, and make ESG reporting mandatory. The US has taken a different approach, favoring less regulation and more financial support in the form of tax breaks for clean industry (renewables plus nuclear and hydrogen). China is planning to expand its emissions trading system to more sectors, decarbonize its heavy industry, and ramp up its use of renewables. The new policy direction is mainly motivated by the ambition to hit net zero emissions targets. But on top of this, governments are now competing for clean industry and trying to challenge China’s leadership on the production of the world’s green technologies such as solar panels and batteries, as well as the production and refinement of materials needed for energy transition such as lithium. These driving forces are leading to policy that will impact every sector, not just heavy industry, and will keep ESG near the top of the regulatory agenda over the longer term.