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Bilateral Chamber Member ADNOC Weighs New US$20bn Offshore Gas Project to Meet UAE’s Growing Demand

May 31, 2017 | The National AE

Abu Dhabi National Oil Company (Adnoc) is considering greenlighting another huge gas project in the Western Region, which could meet nearly 20 per cent of the UAE’s gas demand by the end of the decade.

The state oil company’s investment committee is considering proposals for a US$20 billion development of the Hail and Ghasha, Delma, Nasr and Shuwaihat “ultra sour” gasfields, which lie in relatively shallow water south-west of Abu Dhabi city, about half way to Ruwais city.

Known collectively as the North-West Area, the sour gas prospect is estimated by analysts to contain about 5 trillion cubic feet of gas and forecast to produce 1 billion cubic feet per day (cfd), which would equate to about 18 per cent of the UAE’s current demand, or enough to provide gas and water to 400,000 homes.

“Tapping into undeveloped gas reservoirs is part of Adnoc’s focused strategy to drive a more sustainable and economic gas supply,” said Abdul Munim Saif Al Kindy, Adnoc’s director of upstream.

The country’s gas demand has been growing at a rate of about 6 per cent a year and has required increasing amounts of imports over the past few years. Abu Dhabi is addressing this by prioritising gas development, as well as the nuclear programme.

The North-West Area design concept, which was delivered by Genesis Oil and Gas, a division of France’s Technip, calls for the construction of a number of artificial islands, similar to those pioneered for Abu Dhabi’s offshore Zadco oil project. As well as the offshore complex, there would be a number of onshore processing facilities.

Adnoc is expected this month to receive tenders for the front-end engineering and design (FEED) contract. Adnoc executives have held preliminary meetings on the Feed contract with Australia’s WorleyParsons, Technip, London-based Amec Foster Wheeler (which is object of a takeover bid by Wood Group), Bechtel (London office) and Fluor (Houston office).

“This is the next huge opportunity in the Abu Dhabi oil and gas sector for engineering firms after Zakum 750 [Adnoc’s vast offshore oil development operated by Exxon Mobil],” said Terry Willis, the Dubai-based director for the Middle East, Africa and former Soviet Union for UK trade association EIC Connect.

The North-West Area’s chances of getting the go-ahead have been improved because of Abu Dhabi’s success with its giant Shah Gas Devleopment, onshore in the Western Region.

Al Hosn Gas, which is owned 60/40 per cent by Adnoc and Occidental Petroleum, respectively, last year delivered the US$10 billion Shah project on time and on budget. Shah produces a total of 1 billion cfd, of which 500 million cfd is delivered to the UAE’s gas grid, as well as producing 33,000 barrels per day of petroleum condensates and 4.4 million tonnes per day of natural gas liquids. Already, Al Hosn has laid out plans to increase output by 50 per cent.

One of the biggest stumbling blocks to developing Shah, which was discovered in the 1960s, was the extreme “sourness” of the gas, meaning it contains very high levels of hydrogen sulphide and carbon dioxide (23.5 per cent and 10 per cent, respectively). Techniques only recently developed have allowed the partners to safely and profitably separate the sulphur; indeed, the 10,000 tonnes a day of pure sulphur produced at Shah has catapulted Abu Dhabi to near the top of the world sulphur producers league table. Adding the North-West Area output would considerably increase that output, which is used for fertiliser and in other end products.

“Adnoc has capitalised on its success and experience in ultra-sour gas development to access a number of undeveloped sour gas and oil reservoirs,” said Mr Al Kindy. “The development of these reserves has turned the UAE into a global hub for expertise in sour gas development and sulphur management.”

Oxy has been working with Adnoc to evaluate the offshore North-West Area, as has Wintershall, a subsidiary of German chemicals group BASF, and Austria’s OMV, which is nearly 25 per cent owned by Abu Dhabi’s Mubadala Investment Company.

“Adnoc has really learnt their lessons from the Al Hosn project in sour gas development,” which is the largest of its kind in the world, said Mr Willis.

For the North-West Area project, Adnoc has commissioned Arcadis Vectra, a consulting company, to conduct the health, safety and environmental impact study, which it is expected to deliver in the fourth quarter of this year.

Adnoc also received bids in March for the Hail and Ghasha “island detailed design and survey” and the project management contracts and is expected to award those imminently. Industry sources say Houston-based KBR was the lowest bidder on the latter.

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