Oil expansion plans curbed, says report

OPEC cuts, complex oil reservoirs and uncertainties over concession renewals are hindering Abu Dhabi's efforts to raise oil production capacity, according to a leading investment bank. Analysts at Morgan Stanley said the emirate had been "forced to dramatically curb expansion projects" that were supposed to raise its oil production capacity by 40 per cent to 4 million barrels per day (bpd) from 2.85 million bpd by 2015.

"The UAE's foreign partners, including Total, Shell, BP and ExxonMobil, are reluctant to invest in further idle capacity expansion at a time when they cannot sell what they produce [due to reduced OPEC quotas] and are facing an uncertain outlook regarding the renewal of their concession agreements," they said in a recent report. "The cost and complexity of adding production from the UAE's maturing fields and diminishing reserves base while sustaining high levels of resource recovery are also discouraging."

A number of long-standing concessions covering Abu Dhabi oilfields that were signed in the 1930s will expire in 2014 and 2018. But the Government has yet to inform the foreign partners in joint ventures with Abu Dhabi National Oil Company (ADNOC) whether and on what terms the contracts will be offered for renewal. That has slowed progress on ADNOC's previously announced plans to lift capacity to 3.5 million bpd by next year, and senior executives of the company have already acknowledged delays.

Several projects that would have added roughly 390,000 bpd of new oil output "have now slipped beyond 2012", according to Dr Sadad al Husseini, a former Saudi Aramco executive who contributed to the Morgan Stanley report. He also commented on ExxonMobil's detailed reservoir study of the Zakum oilfield, which is one of the biggest off Abu Dhabi's coast. The study cast doubt on whether output from the geologically complex field could be increased by 200,000 bpd while maintaining high levels of oil recovery.

"The complexity of the project and increases in cost estimates since its approval in early 2006 have now delayed completion from 2010 to beyond 2013," Dr al Husseini said. "Such reservoir complexities are typical of UAE oilfields and put in doubt ADNOC's ability to increase production capacity without intense technical participation by the major international oil companies." @Email:[e-mail]