Abu Dhabi and ConocoPhilips signs Shah gas deal

Abu Dhabi has signed a long-awaited agreement with ConocoPhilips for the development of the remote border Shah sour gas field, which involves the world's largest sulphur pipeline.

Government-controlled Abu Dhabi National Oil Company (Adnoc) signed the deal, which will create a joint venture to be owned 60 per cent by Adnoc and 40 per cent by the US energy giant.

It is believed the project will cost in excess of $10 billion (Dh36.7bn) given the topography of the field and the high sulphur concentrations in the gas deposits.

But industry sources noted the costs were in the range of $13-14bn in 2008 when construction materials and contracting expenses were at their peak.

"This large-scale project involves the development of sour gas reservoirs within the Shah field, located onshore approximately 180km south-west of the city of Abu Dhabi," Adnoc said in a statement after signing the contract.

"The project will involve several gas gathering systems, construction of processing trains to process one billion cubic feet gas per day at Shah to produce 540 million cubic feet per day of network gas, in addition to new gas and liquid pipelines and the construction of sulphur exporting facilities at Ruwais Industrial City in the emirate."

It said great attention had been given during the Front End Engineering and Design (Feed) stages to select state-of-the-art HSE systems and "as a result of extensive risk assessment and recovery studies."

According to Adnoc, one of the world's largest oil producers, a new firm will be formed to manage and operate Shah facilities upon completion of the project.

The US-based Fluor Corporation has completed the Feed work for the project, which will be launched this year and completed within five years.

The company said Feed work lasted around 18 months and that engineering, procurement and construction packages would be awarded in the near future.

"The project is massive as it will meet a large part of the country's gas needs but its costs are expected to be high because all the gas is sour. It will involve the world's longest liquid sulphur gas line as it will be around 300km," a Fluor official told Emirates Business during a recent gas conference in Abu Dhabi.

The pipeline has the capacity to transport one billion cubic feet of produced gas through the desert to Ruwais processing facilities, south of Abu Dhabi city.

Located around 10km from the Saudi border, the Shah field covers an area of around 400sq km and is believed to contain large gas deposits, most of which are sour with high sulphur concentration.

Shah, one of the largest upstream gas contracts to be carried out by the UAE, is part of a massive investment programme by Abu Dhabi to expand its gas resources and meet a rapid growth in demand due to a steady expansion in the industry sector and power generation facilities.

Besides local production, the UAE is getting around two billion cubic feet of Qatari gas per day through the Dolphin underwater pipeline. Part of the gas is supplied to Oman under a long-term contract.

Sharjah-based Danagas is also due to receive gas from Iran under an initial agreement signed a few years ago.

The UAE's gas deposits of around 6.5 trillion cubic metres are the world's fifth largest after those in Russia, Iran, Qatar and Saudi Arabia. But the bulk of those deposits are sour gas which is mostly associated with crude.

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