Dh220bn Abu Dhabi investment in hydrocarbons

Abu Dhabi is planning to pump nearly Dh220 billion into projects to develop its oil and gas sector in the next 10 years, taking advantage of a sharp fall in construction costs following the 2008 global fiscal crisis, a senior energy official in the emirate was quoted on Sunday as saying.

The Abu Dhabi National Oil Company (Adnoc), which manages the emirate’s mammoth hydrocarbon sector, is also pushing ahead with a mega sour gas venture despite the withdrawal of its partner ConocoPhillips, Adnoc’s CEO Yousuf bin Omair told the semi-official daily Alittihad.

Omair said Adnoc is considering inviting new partners to the Shah sour gas project after the US-based ConocoPhillips ended its 40 per cent share.

“Adnoc is allocating nearly Dh200bn for investment in its oil and gas sector as well as petrochemicals in the next 20 years,” he said.

“The projects will expand Abu Dhabi’s crude oil production capacity to nearly 3.5m barrels per day by 2017 from 2.5m bpd at present…our investments have not been affected by the global crisis.”

Omair said the crisis, which has forced many companies in the region to shelve projects, has “constituted an incentive for Adnoc” to push ahead with its projects because of the decline in construction costs.

He said most oil operating companies in Abu Dhabi are carrying out projects to expand their output capacity within a long-term plan by the Supreme Petroleum Council (SPC) to develop the emirate’s hydrocarbon industry and maintain its position as one of the world’s largest oil and gas suppliers.

His figures showed such projects would push the capacity of the Abu Dhabi Company for Onshore Oil Operations (Adco), the UAE’s largest oil producer, by around 400,000 bpd to 1.8 million bpd by 2017.

Zakum Development Company (Zadco) is also bolstering its upper Zakum to around 750,000 bpd from 500,000 bpd while ADMA-OPCO, which operates most offshore fields, is developing its lower Zakum and other fields.

Borouge, a major petrochemical producer, is also investing upto $4.5bn to lift its capacity to nearly 4.5m tonnes per year when the third expansion stage is completed in 2014, according to Omair, also SPC’s Secretary General.
Turning to Shah project, Omair said Adnoc is pressing ahead with the development of the remote field near the Saudi border.

“Adnoc is continuing development plans for the field according to plans…ConocoPhillips’ withdrawal will not affect these plans…we are currently discussing whether to admit new partners into the venture if we find it suitable and meet the required standards and if we believe this will constitute a significant addition to this vital project,” he said.

In recent statements, another Adnoc official said the sharp decline in construction expenses because of the global crisis is expected to slash the costs of the Shah sour gas project by more than 30 per cent.

Ismail Al Rumhi, Director of the Gas Treatment Section at Adnoc said the Shah project would be among several bids to be invited by Abu Dhabi in the next two years, adding their cost would be $billions.

Rumhi did not specify the new cost of Shah Sour Gas project but industry sources had estimated it at more than $12bn in mid 2008.

The project had been in the pipeline for many years but was delayed because of the surge in costs. Initial costs were around $eight billion.

Shah development is part of a long-term 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.

From around six per cent during 1990s, growth in gas demand in the country is projected to pick up by nearly 13 per cent in the next decade, according to official forecasts. A large part of the increase will have to be met through the development of local gas resources and imports.

The US-based Fluor Corporation has carried out the FEED work for Abu Dhabi Gas Industries (Gasco), the Adnoc subsidiary which is managing the scheme.

In separate press comments, Omair said Adnoc was also locked in projects to lift its gas production by more than 1.5 billion cubic feet per day. He said nearly 540m cubic feet per day would come from the giant Shah oil field.

Abu Dhabi is the main oil and gas producer in the UAE, which controls around 98bn barrels of proven crude resources and nearly 6.5 trillion cubic metres of gas. The UAE gets nearly two billion cubic feet of gas per day from Qatar through the Dolphin subsea pipeline linking its Taweela plant to the giant offshore North Field, the world’s largest reservoir of non-associated gas, with estimated reserves of nearly 25 trillion cubic metres.