Abu Dhabi’s onshore fields to continue pumping after deal with oil majors expires

Abu Dhabi’s onshore partners can continue pumping after a 2014 expiry date if the concession is not relicensed in time, said the head of Adnoc.

Adco's concession to run Abu Dhabi's onshore fields will continue to run after the deal with big oil companies runs out in January. Rich-Joseph Facun / The National

Abu Dhabi's onshore oil partners will stay on until the emirate re-awards a landmark concession, even if that comes after the formal January expiry, said the head of Abu Dhabi National Oil Company (Adnoc).

The emirate's oldest concession, a family of onshore fields that contribute half of all output, is due to expire at the start of next year after a 75-year-run.

Bids are due later this month for rights that are currently held by BP, Total, ExxonMobil, Royal Dutch Shell and Portugal’s Partex.

“The agreement expires in January but the operating consortium will continue to operate regardless of the expiry date,” said Abdulla Nasser Al Suwaidi, the director general of Adnoc. “The JV will expire but still the operations will continue without any disruption.”

Mr Al Suwaidi’s comments signal that the emirate may be willing to take more time in making its decision than previously indicated. This spring the Supreme Petroleum Council, the emirate’s highest body for oil policy that includes many members of the ruling family, struck down a proposal to extend the onshore concession for an extra year to allow adequate time to evaluate bids.

At that time, Mr Al Suwaidi also said Adnoc, which submits recommendations to the council, aimed to complete the tendering process by the end of this year.

It is more likely the concession will be handled in the same way as Abu Dhabi Gas Industries (Gasco), the Adnoc’s onshore gas company. That concession expired in October 2008 and was renewed five months later on a backdated contract.

“We are still evaluating the offers,” he said in Abu Dhabi. “We have not received any of the bids. They are actually due later this month.”

The companies invited to bid include the current Abu Dhabi Company for Onshore Oil Operations (Adco) shareholders, with the exception of Partex, as well as newcomers such as Russia’s Rosneft and China National Petroleum Corporation.

Although Adnoc is expected by many industry executives to slice up the concession field by field, bidders have been asked to write a proposal for operating the whole concession.

Among the major fields operated by Adco are Bab, where Shell this year was granted the right to develop gas, and Shah, where Occidental of the United States is nearing completion of the emirate’s first sour gas project.

Selecting the partners with the right technology for mature fields is vital to meeting the emirate’s targets in ramping up pumping capacity. The UAE is close to reaching 3 million barrels per day (bpd) in capacity, part of an overall target to boost capacity to 3.5 million bpd by 2017, said Suhail Al Mazrouei, the Minister of Energy.

The Habshan-Fujairah pipeline, responsible for allowing all of the emirate’s onshore crude production to bypass the Strait of Hormuz, is not yet fully operating, he added.

Technical problems at the 380-kilometre pipeline, originally due for commissioning in 2010, have forced the emirate to continue to rely on tankers through the bottleneck.

Abu Dhabi plans to launch two carbon dioxide injection pilots by 2015 and is planning another three, said Mr Al Suwaidi. One pilot, part of an ambitious greenhouse gas emissions burial programme that was to span the UAE, has been completed at the Rumaitha field. But Adnoc and Masdar, the government’s clean energy company that was to provide the carbon, have been unable to agree on a price for large-scale deployment of carbon capture and storage, as the technique is called.