Exclusive: Majid Jafar, CEO, Crescent Petroleum

New opportunities

Certainly for Crescent, the biggest opportunities are on its doorstep. The company has expressed interest in new bidding rounds in Lebanon and Egypt, and is keeping a close eye on developments in Yemen and Sudan. In Iraq, the potential is “immense”, says Jafar.

Crescent Group, the parent company of Crescent Petroleum, Crescent Enterprises and Gas Cities Limited, has invested more than $1.5 billion into the Arab state over the last five years.

“I expect that to grow significantly in the coming years,” says Jafar, who is also vice-chairman of the Crescent Group. “The key thing that is not yet clear is the political stability. That still leaves a lot to be desired.”

Crescent is more familiar than most with the difficulties of doing business in the region’s unstable states. Along with Dana Gas, the company has struggled to secure payment for the fuel it has supplied to power stations in Kurdistan, caught in the battle between the semi-autonomous region and Baghdad over oil rights. Listed Dana said in its 2011 end-of-year results that trade receivables stood at Dhs1.74 billion (about $474 million), of which more than half was owed by Kurdistan.

Baghdad pledged in September to resume payment to foreign firms working in the region in exchange for the Kurdistan Regional Government guaranteeing oil exports. The deal is a small step towards resolving the political bickering that has crimped the growth of Iraq’s oil and gas sector, but has been received cautiously by Jafar.

“It’s good news, but we have to be prudent,” he says. “We can’t – based on previous experience – depend on it. In 2011 there were two payments and then nothing happened, and then one payment. It’s not a reliable income stream.”

Dana has also felt the pinch of receivables in Egypt. The operator, which is 21 per cent owned by Crescent Petroleum, is owed millions of dirhams by the Egyptian government after the crisis-hit state failed to keep pace with payments to foreign oil and gas companies. Dana’s income woes raised questions over the firm’s ability to repay a $1 billion sukuk that matured in October.

“The issue Dana Gas has faced is not one of solvency, but of liquidity,” says Jafar, who is a member of the company’s board of directors, “It’s in discussions with bondholders on the best way forward.”

For now, Jafar’s sights are firmly on the long game. As a member of the World Economic Forum’s Global Agenda Council on Youth Unemployment, he is keenly aware of the risk created by the Middle East’s demographic time bomb.

More than 100 million jobs must be created in the next 20 years if the region is to absorb its youth bulge, the bulk of which will need to come from the private sector. To enable this, Arab governments have much to do to. Pressing issues include reforming outdated bankruptcy laws, slashing red tape and closing the gap between inflated public sector wages and those offered by the private sector.

“My own hope as a businessman is that we will start to look at the underlying economic issues,” says Jafar.

“The role of government is to create the right policies and environment so the private sector can flourish and absorb the young people in productive employment. Using government funds to employ more within the public sector is not sustainable.

“I see opportunity and potential but I also see risk,” he adds. “It’s not Iran, or the Palestine peace process, or the revolutions per se. Our youth bulge is an opportunity and a threat.”