Oil Rally Risks Reverse If Idle Fields Return, Dana Gas Says
(Bloomberg) -- WATCH: Oil’s rally may end or even reverse if producers resume pumping some of the 10 million barrels of daily output capacity that now sits idled, according to the head of Middle Eastern energy producer Dana Gas PJSC.
Oil and gas companies are looking to bounce back from a year in which the coronavirus hammered economies and caused crude prices to plummet. Firms canceled projects, suspended operations and cut spending. Curbs on output from the world’s largest producers have helped oil recover to more than $60 a barrel, roughly triple last year’s low in April.
“I would hesitate to say that we’re in the start of a super cycle for oil,” Dana Gas Chief Executive Officer Patrick Allman-Ward said in a Bloomberg Television interview. “It won’t take very much to put the demand-supply balance back to a negative space.”
The roll-out of vaccines, strong demand in China and cuts by the OPEC+ cartel have helped bolster prices and reduced oil stockpiles, he said. Speaking later on a separate conference call with reporters, Allman-Ward said he was fairly optimistic oil will stay near current levels for the rest of the year.
Dana Gas, based in the United Arab Emirates, reported a 2020 loss of $376 million, compared with a $157 million profit in 2019. The company, which operates mostly in Iraq and is one of the biggest private-sector gas producers in the Middle East, experienced a decline in sales of almost a quarter as prices and output fell.
Read about the full-year loss and financial outlook at Dana Gas
The annual loss was largely due to writedowns on Egyptian assets sold last year. Without the onetime $412 million write off, the group would have turned a profit, Allman-Ward said in the Bloomberg interview. The $36 million gain from continuing operations came mostly from Iraq, where production at the company’s developments in the semi-autonomous Kurdish region rose last year.
Dana Gas is working to more than double its Iraqi gas production to around 950 million standard cubic feet a day by early 2025, Allman-Ward said on the media call.
It will do that by adding two processing trains. The first unit is set to produce gas in 2023.
Pearl Petroleum, the joint venture through which Dana Gas operates in Iraq, is seeking a $250 million loan from the U.S. International Development Finance Corp., Allman-Ward said.
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