Photo: Rudaw
SULAIMANI, Kurdistan Region — The Kurdistan Region could be a “major gas hub,” the CEO of Crescent Petroleum told Rudaw in a recent interview. His company has invested billions of dollars into the gas sector, which he believes will end electricity shortages and lessen the environmental impact from diesel-burning power generation stations.
"We are confident that the gas expansion plans we have in place will enable 24-hour electricity in the Kurdistan Region," CEO of Crescent Petroleum and Managing Director of Dana Gas, Majid Jafar told Rudaw's Omar Moradi in an interview on June 13.
"We have discovered thanks to our investment, enough gas resources in the fields of Khor Mor and Chamchamal to meet the full needs of the Kurdistan Region. Not only for electricity but to support local industry," said Jafar.
Cleaning up electricity generation in the Kurdistan Region and Iraq is part of the plan to meet the country’s obligations under the Paris climate accord, which Baghdad ratified last year.
"We have managed to avoid more than 40 million tons of CO2 of emissions by gas replacing diesel. That's like taking all the cars in Sulaimani off the road for many years," Jafar explained.
“We have actually reduced our carbon intensity significantly, it's now less than half of the industry average... We are actually studying ways to offset the remaining emissions to achieve net-zero, and we hope to announce that in the future,” he added.
Rudaw: Mr. Jafar, thank you very much for being here with Rudaw. You're very welcome, sir. I want to know about your expansion plan in the Kurdistan Region, what has the preparation been like for the expansion program and will you be reaching the target of producing 650 million cubic per day by that time?
Majid Jafar: Thank you, it's good to be here. Good to be with Rudaw again. So, as you know, we have been producing now, Alhamdulillah, continuously since 2008. Our current production is about 450 million cubic feet per day of gas, plus condensate and LPG. We have announced
the expansion plan, the next phase of which is to add 250 million cubic feet per day.
It was supposed to have happened by the beginning of next year, 2022. Due to the coronavirus pandemic, we had one year delay where we could not proceed with the construction. We continued the work in offices, of course, with engineering and some procurement, but the construction was delayed. We have now, Alhamdulillah, cautiously but optimistically lifted the stop that was on the project. We agreed this with the [Kurdistan Regional Government] KRG and with our contractor, and we are now on target so far, touch wood, Insha’Allah, to be implementing that by April of 2023, so in two years from now. We are taking all steps to try to do it as quickly as possible.
It's about 600 million dollars for this phase, part of ongoing expansion projects. Of course, there is still coronavirus. There are still some challenges, not only here but globally with supply chains. Sometimes our contractors may have an issue. Whether it's in UAE or in India, some of them have their own suppliers, for example from India. So it's all depending a little bit on the coronavirus.
Alhamdulillah, we have now put in a lot of safety measures to keep our staff safe, to keep our operations safe. Now more than 90 percent of our staff here in Kurdistan have been vaccinated. This is enabling us to move more quickly, so we are optimistic Insha’Allah.
Great. So what about the electricity production and the gas that you will produce in the Kurdistan Region, do you think that this extra gas can be sent to electricity stations in the Kurdistan Region, and solve part of the problem of electricity in Iraq?
Yes, so the story of electricity in Iraq is a story overall of unfulfilled potential. Kurdistan Region has been much better than the rest of Iraq, more recently. And actually, we have some family history. My grandfather, Dr. Dhia Jafar, in the fifties, when he was the Iraqi Minister of Development, he opened the hydroelectric dams in Dukan and Darbandikhan, here in Sulaimani governorate in ‘56 and ‘58. And then for fifty years, no Iraqi government put new electricity generation inside the Kurdistan Region.
Since the fall of the regime and the new investment climate which the KRG installed with law and contracts, there's been more investment. Mainly on oil, but we focus on gas. So this enabled us to invest more than 2 billion dollars so far. We have plans to invest another billion just in the next few years – a significant expansion. And we took the electricity from a few hours a day to much better than that, depending on where. Now, of course, we are on the gas side. There are very good, well-known local companies we should mention – Mass Global, Qaiwan and Kar – which are doing the power stations. We need both, so private investment, which has enabled it to move quickly.
We are confident that the gas expansion plans we have in place will enable 24-hour electricity in the Kurdistan Region. The main supply hubs now are in Erbil and Sulaimani. There is also Duhok, there is a power station there, which is waiting for gas and that will be a future step as well. We have discovered, thanks to our investment, enough gas resources in the fields of Khor Mor and Chamchamal to meet the full needs of the Kurdistan Region, not only for electricity but to support local industry. And then surplus can be sent, whether to other parts of Iraq or even export markets. Kurdistan Region can be a major gas hub and this is also the vision of KRG.
So, you think the Kurdistan Region has enough gas resources to be used internally and exported, for example, to international markets like Turkey and some parts of Europe?
Yes, the Region – I mean, we have proven up reserves 15 trillion cubic feet but potential resources of 75 trillion cubic feet. The KRG has announced that it estimates the potential in the Kurdistan Region of 200 trillion cubic feet. So really, the resources and potential is definitely there, Insha’Allah, to meet the local needs as well as industry and surrounding markets, but the right investment framework is needed, which is there actually. I mean the contracts, the gas price, the elements are there.
We have a very good partnership with the ministry of natural resources and the new minister, Dr. Kamal Atroshi is a very experienced and knowledgeable figure in the international oil and gas sector, very well respected throughout Iraq. But really, it's a partnership with the whole government, and that includes Ministry of Interior, Ministry of Health. We are proud to announce today that actually, we are finalizing, Insha’Allah, with the Ministry of Health [a] donation of 100 thousand Covid vaccines for the Kurdistan Region. Also trying to give priority for the Anfal areas and the areas where are operations, but all of Kurdistan Region. We find the vaccination is the best way to get back to normal and to be able to implement the projects quickly, and we've been focused on that.
We've also had a very good partnership with the governor of Sulaimani, with the mayor of Chamchamal, and we are honored to have the governor, mayor, as well as Deputy Minister Ahmed Mufti here with us today for the opening of this office. It's really a long-term partnership, and that is what is needed. At the same time, it's important to move quickly because markets are changing, international and regional markets are changing, so now is the time to move.
So the United States has always encouraged the Iraqi government to use the Kurdistan Region gas resources and also encouraging internationally to develop the Kurdistan gas reserve. To what extent is Crescent petroleum or Dana gas part of this initiative? And do you think it's a realistic point of view for Kurdistan gas to be used as a replacement for imported gas by the Iraqi government?
Iraq overall really has no need to be importing electricity or gas. It's a short-term thing as the government in Baghdad has said, but it requires the development of Iraq's own resources. The US Department of Energy commissioned a study on gas potential in Kurdistan and they interviewed us, we gave our input on that study, as did other companies. The priority should always be for electricity generation because that's the highest economic value for any country to use that gas. And especially when you are replacing diesel, because diesel is more expensive and more polluting.
So, the US government has focused on this issue of – that Iraq should be self-sufficient with its own energy. It doesn't make sense when you have so much energy not to be making use of it. Some US governments may focus on the geopolitical aspect, others may now focus on the environmental because when you replace diesel with gas, you get a big environmental benefit. We have managed to avoid more than 40 million tons of CO2 of emissions by gas replacing diesel. That's like taking all the cars in Sulaimani off the road for many years, I mean the environmental benefit. But really, our focus is what is best for the local economy, Kurdistan Region, Iraq. Anybody who wants to partner to help in that objective, that's great.
Regarding the United States' role, did you guarantee any financial support from any institution of United States?
The US has what they call the DFC, Development Financial Corporation, which is an arm of the US government which can fund infrastructure projects. We had discussions with them, they have an interest to lend money. Nothing is finalized yet, but it could be one option. But we also have local banks, UAE banks, contractors also who act as partners in the way we contract with them. So there are many options and because of the large amounts to be invested, we have to look at many options, you cannot only have one option.
You talked about the environmental impact, and you have been an international speaker regarding the environment agenda. I want to ask you about the net zero emission policy that is now in the international arena. How does your company face this policy and what is your detailed plan and program regarding reducing emissions?
We have actually reduced our carbon intensity significantly. It's now less than half of the industry average. At the same time, our gas flaring we have reduced significantly down to 0.5 percent and we are pushing that even further down to zero. And we are actually studying ways to offset the remaining emissions to achieve net-zero, and we hope to announce that in the future.
Now, because we are gas, and our condensate that we produce looks like this, you know, a light and clean product, so our carbon intensity is low. But even more important than that, as I mentioned, is this gas replaces diesel, so without it, you would be burning diesel. So actually, it's net negative in terms of the impact on the economy, and this is an important point. Countries like the United States or the United Kingdom which have achieved big drops in their emissions have achieved it by gas replacing coal in their case.
Here in the Middle East, coal is not so common as a fuel, but liquid fuels – mazut, fuel oil and diesel – these are the commonly burned fuels. So if you can use gas to replace those, you have an immediate saving of cost, and our investment of 2 billion has achieved maybe ten times more savings for the KRG in terms of fuel costs since we started producing in 2008, but also in terms of the CO2 emissions and the impact on climate change.
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