Adnoc moving ahead

Low oil prices and the downturn are no deterrent for the oil company, which pushes ahead.

Two men chat in front of an Arabian Gulf map inside the Adnoc showroom at the Abu Dhabi International Petroleum Exhibition & Conference.

The Abu Dhabi National Oil Company (Adnoc) is forging ahead with plans to boost its oil and gas production capacity amid sinking prices and a credit crunch, a senior official said. The Government wants to expand oil production capacity by about 700,000 barrels per day (bpd) to 3.5 million bpd, as well as boost gas supplies to the emirate by several million cubic feet (cf). Adnoc has 11 projects under way or on the drawing board which will influence the the emirate's economy in the next decade and determine whether the UAE remains an influential producer among Opec nations.

Sinking prices may slow some aspects of the expansion projects, said Abdullah Nasser al Suweidi, the deputy chief executive of Adnoc, but the company was committed to boosting production. "Where we can, we'll wait, but our main objectives and plans are not affected," he said on the sidelines of last week's Abu Dhabi International Petroleum Exhibition and Conference (Adipec). Adnoc's plans call for new oil production capacity to be split nearly evenly between onshore and offshore reservoirs. A large proportion of new gas will be produced from challenging sour gas reserves.

An update on the projects is presented here. 1. Gas from the sea: Integrated Gas Development Adnoc's project to unlock 1 billion cf of offshore natural gas will be the first major expansion project to be completed, in 2013 or 2014, according to Mr Suweidi. "This is going ahead right now," he said of the project. The massive US$5 billion (Dh18.3bn) effort, which has been in the works for years, would pipe associated gas from two offshore fields: Umm Shaif and Khuff, to onshore processing centres. Most of the gas would be used as feedstock for Adnoc's own power stations, according to Ali al Shamsi, the company's onshore division manager.

Abu Dhabi Gas Industries Company (Gasco) prequalified four firms to bid for the project in June. 2. More oil onshore: Sahil-Asab-Shah expansion Adnoc's first increase in onshore crude capacity, the SAS project, will be finished at nearly the same time as IGD, Mr Suweidi said. The Abu Dhabi Company for Onshore Operations (Adco), an Adnoc subsidiary, hopes to raise output from the fields by 60,000 bpd, as part of its scheme to increase production by 400,000 bpd to 1.8 million bpd.

In September, it divided the project into two parts, and is expected to award an engineering and construction contract before the end of the year. 3. Expanding a giant: Upper Zakum In 2006, the Supreme Petroleum Council tapped Exxon Mobil to help it raise production at the offshore Upper Zakum reservoir, one of the country's prized fields. The project aims to increase production from 550,000 bpd to 750,000 bpd.

At last week's conference, the Society of Petroleum Engineers presented a study of the expansion work, which they said would be delayed at least until 2015 due to escalating costs and uncertain availability of drilling rigs. In September, Adnoc awarded a $75 million contract to Amec, a British engineering firm, to complete minor work. 4. A sour prize: Shah ConcoPhillips wrested this $10bn to 15bn sour gas deal from Shell and Occidental in a well-publicised struggle earlier this year. Abu Dhabi has the fifth-largest reserves of natural gas in the world, but most are contaminated by hydrogen sulphide, making them "sour" and more expensive to develop.

Shah is one of the emirate's largest deposits of sour gas, located underneath the oil reserves expanded by the SAS project. The onshore field will produce 1 billion cf of natural gas per day (cfpd), containing as much as 30 per cent hydrogen sulphide. Adnoc wants the gas to start flowing by 2011. Conoco will complete front-end engineering and design for the project by the end of next year, a company official told Reuters this week.

5. Sour gas, act II: Hail Adnoc hopes to start production of sour gas at this smaller, offshore field by 2011. The development, which lies within Adco's concession, has been transferred to Gasco, and is expected to produce about 500 million cfpd. Adnoc has said little publicly about the project, but last Friday, business news publisher MEED reported that Technip, a French firm, would be awarded the front-end engineering and design contract.

PFC Energy, a Washington-based consultancy, said Adnoc was looking to begin production at Hail as soon as possible, and opted to develop the Hail field itself to avoid the lengthy delays that characterised the negotiations over Shah. "While the debate over a fundamental concession system re-haul continues, opting to retain Hail within one of the existing companies does indicate a desire for continuity and stability," the firm said in a report. "In delivering the project directly to Gasco, Abu Dhabi could effectively slash at least one year off the execution process."

6. New concession: Jarn Yabhour and Ramhan fields Occidental clinched the concession to develop these two small fields close to the capital last month. The deal was Abu Dhabi's first concession in three decades to a foreign oil and gas firm. Occidental said it would invest $500 million in the two fields to produce about 20,000 bpd. The firm expects production to start next year. Analysts said the crude would be directed to the adjacent refinery at Umm al Nar to meet growing domestic needs for petrol and other oil products.

7, 8. New oil and gas from a stalwart: Bab Bab is one of Abu Dhabi's oldest fields, and Adco has plans to drill 543 more wells there, according to a draft of Adco's drilling plan published by Petroleum Intelligence Weekly. The new wells will increase the field's production to 435,000 bpd. Development of sour gas reserves at Bab has been pushed back several times because of concerns about handling the toxic gas safely near the adjacent population centre. The field was initially included in a tender issued for the Shah gas development, but the project was split into two last year to attract more bids from international firms.

The field could yield between 500 and 800 million cfpd, according to the tender Adnoc put out for the project last year. The gas in the well is 50 per cent carbon dioxide and 15 per cent hydrogen sulphide, leaving only a small proportion of natural gas. Total, the French oil major, is said to be a front-runner, but Exxon Mobil, Occidental and Germany's Wintershall all submitted bids last year. Adnoc has not announced a schedule for development of the field's sour gas.

9. Birth of small fields: Qusahwira, Bida al Qemzan and Mender Abdul Munim al Kindy, the general manager of Adco, has announced plans to develop these three smaller fields, and the company is drilling some wells in the reservoirs. Drilling will intensify in 2011, Adco's drilling plan said. Together, the three fields will produce 76,000 bpd. In interviews this year, senior Adnoc officials have announced plans to begin to tap smaller reservoirs that were passed over when Abu Dhabi's oil fields were first developed - a move to tap these fields would be a first step in that direction.

10. The 10-year plan: Adma-Opco The Abu Dhabi Marine Operating Company (Adma-Opco) is moving forward with plans to increase offshore crude production to 1 million bpd by 2019, from about 600,000 bpd today, according to Ali al Jarwan, the general manager. Adma-Opco produces oil and gas at the Umm Shaif and Lower Zakum fields, as well as host of smaller reservoirs. 11. Search for more gas: Shell deal

Last Monday, Shell and Adnoc announced an agreement to explore for new offshore gas deposits lying deep beneath the sea floor. Shell plans to examine exploration opportunities and write a proposal to Adnoc in three months, according to Nejib Zaafrani, the chairman and managing director of Shell Abu Dhabi. "We have huge expertise in deep gas," Mr Zaafrani said. "As a partner there, we could really add value."

* with agencies [e-mail]