I am pleased to report that Dana Gas achieved commendable performance during 2010, despite challenging global economic conditions

Such strong growth reflects the economic fundamentals driving regional gas demand, particularly progressive substitution away from liquid petroleum products, as well as increasing demand for industry and electricity generation. More recently and unexpectedly, the unfortunate recent nuclear disaster in Japan has highlighted the importance and value of gas not only as “the fuel of the 21st Century”, but as a safe and reliable one, and environmentally the cleanest of the fossil fuels. Bearing in mind all the above factors, I am confident that the long term supply-demand fundamentals will remain positive for our sector in a world of robust energy prices and growing demand for both oil and particularly gas, both regionally and internationally. 

These realities underpin the original vision of our founders to create a MENASA Region gas champion in Dana Gas, and we remain true to that vision. The Company continues to develop and maintain strong relationships with our stakeholders including governments, partners, and local communities, as we take pride in our regional identity, strong partnerships and entrepreneurial solutions-based approach. 

We live in rapidly changing times. The unprecedented changes to the political landscape emerging in late 2010 are rippling through the MENA region causing private-sector and public-sector organisations to face operational and logistical challenges whilst the fall in share prices across regional bourses reflect the business uncertainties that investors and stakeholders are experiencing in these uncertain times. 

In this economic and political climate, we are closely assessing the market fundamentals, our corporate strategy and the anticipated profitability of our assets. The Management of Dana Gas is continually assessing and evolving strategies to enhance shareholder value through pursuit of new opportunities for revenue generation while further developing our existing assets and rationalising the Company’s cost base. The management team is also putting in place a financial strategy to protect and enhance the interests of our shareholders by ensuring that the true value of Dana Gas is reflected in the Company’s share price.

Very importantly, we would point out that Dana Gas has a comprehensive risk management framework. Your Board of Directors maintains regular oversight of its functions and working through the Management ensures that appropriate mitigation strategies are in place to ameliorate the evolving risks to protect the interests of all our stakeholders.

Operations

I am pleased to report that our operations in Egypt have remained largely unaffected by the recent events in the country, aided by the fact that the majority of our workforce comprises local staff and our excellent relations with the local communities where we operate. Of course we remain vigilant, and the situation remains under close review. Over the last year, our Egypt operation has delivered stellar results; we have increased our proved reserves by 90% to 89 MMboe and proved plus probable reserves have increased by 15% to 152 MMboe. Production in Egypt is also up 20%, and we plan to increase this further, by more than 20% during 2011, followed by a similar increase in 2012 when our third gas processing plant comes on stream. 

In the Kurdistan Region of Iraq we continue to deliver significant amounts of gas to two regional power stations, and with the recent completion of our LPG processing plants, we are now in full operation extracting valuable condensate and LPG from the produced gas. We continue to press for payment for the condensate that has been delivered to the Kurdistan Regional Government (KRG), and are actively engaged with the KRG to expedite these overdue payments with urgency. 

The UAE Gas Project to process and transport Iranian gas continues to await the commencement of gas deliveries by the National Iranian Oil Company (NIOC) to our associate Crescent Petroleum. During the year, Dana Gas completed the commissioning of its Sajaa Gas processing facilities after receiving commissioning gas in July from NIOC. However, since that time, there have been leaks discovered in the suppliers’ gas transmission pipeline and these technical matters are currently being addressed by NIOC. Meanwhile, in order to protect its contractual rights, our associate Crescent Petroleum has initiated international arbitration to seek a legal ruling on the binding 25 year gas supply contract with NIOC and expects an enforceable decision by the International Tribunal in less than a year.

Management

I would first like to thank our Honorary Chairman, His Highness Sheikh Ahmed bin Sultan Al-Qasimi, for his encouragement and wise guidance during the past year. Our Board of Directors has worked tirelessly in 2010 on your behalf and we all look forward to continuing our task into 2011 and beyond. I would like to express my gratitude to all of my colleagues on the Board for their untiring efforts in guiding management through another successful year. Moreover, I wish to record my appreciation for the excellent strategic advice and global insight provided by our esteemed International Advisory Board.

Our capable management team, led by CEO Mr. Ahmed Al Arbeed, and supported by Executive Director Mr. Rashed Al-Jarwan, continues to deliver full value for our assets. On behalf of the Board of Directors, I wish to register our thanks to the Management and all our employees for their dedication and hard work over the past year, which was pivotal in achieving the results realised.

Last but not least to our Shareholders, I would like to express my own as well as the Board’s appreciation for the faith and trust which you have placed in us. We remain committed to the continuing success of Dana Gas and are focused on delivering another profitable year marked by an increase in revenue, production and reserves whilst maintaining our commitment to safety and the environment, and to responsibly serving the needs of the people of this Region to which we belong.

Hamid Jafar
Chairman of the Board