Arab roots a boon in Crescent Petroleum expansion

Crescent Petroleum is planning an entrance into Libya and post-Arab Spring nations.

Crescent Petroleum is renewing talks with Egypt to create an industrial cluster and is feeling out opportunities in Libya to take over concessions left behind by other foreign investors. Jeff Topping Show more

Crescent Petroleum, the Sharjah oil producer, plans to move into post-Arab Spring countries that it believes will be friendly to regional investment.

It is renewing talks with Egypt to create an industrial cluster and is feeling out opportunities in Libya to take over concessions left behind by other foreign investors. Royal Dutch Shell was the latest major to abandon a Libya concession this year, citing geological prospects.

"The Arab Spring has increased the risk perception for foreign companies, and we see even the large western companies slowing down their investment or putting some projects on hold, and we see the medium-sized ones and smaller ones are just leaving altogether from these countries," said Majid Jafar, Crescent's chief executive.

"So this creates an opportunity for us given that we're from the region and we see the risk differently."

As young governments in the region try to meet the urgent needs for job creation and economic diversification, international majors are marketing themselves to a new group of ministers and national oil company executives.

Forming the right partnerships is also vital to Crescent, which pumps oil in Egypt and Iraqi Kurdistan, but has not received regular payments from host governments.

Although the central government in Baghdad recently struck a deal with Erbil for compensation, Crescent is still awaiting the payments, said Mr Jafar.

Crescent also owns a fifth of Dana Gas, the regional gas producer whose US$920 million (Dh3.37 billion) sukuk matures tomorrow.

"One thing that we've found with many of these countries is that the new governments are more friendly to Arab investment, and especially to investment from the GCC, and the UAE has a positive brand because of its politically neutral stance," said Mr Jafar.

"There's suspicion of western motives because some western countries were very active militarily and it's not quite clear what western motives are."

Libya's new leaders have promised to provide better terms for foreign investors, who grappled with low margins after the country opened in 2005 to US oil producers with the lifting of sanctions.

"Before the Qaddafi regime fell, there was a big stampede into Libya and the bidding rounds got so much more and more competitive that the contracts that got signed in the end were unsustainable, and the profit margins were so thin that the companies were not able to even cover their costs or make a profit," said Mr Jafar.

"You don't want contracts that are so good for the host government that they don't deliver the production growth."

The company also plans to expand on its partnership with Rosneft, the Russian state oil company set to become the world's largest publicly traded oil producer after a landmark deal with BP.

Rosneft and Crescent are deciding on the site of a second exploration well in Sharjah and are evaluating other potential investments in the region.

"There are some countries where we have common potential interests," said Mr Jafar, although he declined to say where. "So we have regular meetings with them on looking at those."