US embassy cable - 05ABUDHABI3237

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