The onshore arm of the Abu Dhabi National Oil Company (ADNOC) has awarded contracts worth US$3.6bn in total for the expansion of production capacity in three fields. The decision to go ahead with the project indicates that Abu Dhabi remains on track to meet its target of increasing production capacity to 3.5m barrels/day (b/d) by 2017 from about 2.8m b/d at present, despite the increasingly gloomy short-term outlook for oil demand.
The contracts awarded by the Abu Dhabi Company for Onshore Oil Operations (Adco) will only contribute an extra 60,000 b/d of capacity, but they are an essential element in a larger scheme envisaging the increase of onshore capacity by some 400,000 b/d to 1.8m b/d. The contracts are for the development of the Sahil, Asab and Shah fields, and the scope of work includes the upgrading of the oil processing infrastructure in the southern region of the emirate. Originally tendered as a single package, Adco split the work in order to bring down costs. The contract for the larger element, covering the Asab field, was awarded to UK-based Petrofac for US$2.3bn; a consortium of Spain’s Tecnicas Reunidas and the Athens-based CCC Group was awarded a US$1.3bn contract for work on Sahil and Shah fields. The work is scheduled for completion in 2012.
The larger onshore development scheme will entail increasing production from four other fields. Adco is currently evaluating bids from Amec of the UK and Veco of Canada for the programme management contract.
Adco is one of three principal upstream oil production affiliates of ADNOC, which is entirely owned by the government of Abu Dhabi. ADNOC has a 60% share in Adco, with the remaining equity held by BP, Shell, ExxonMobil, Total and Partex. The other two companies, ADMA-Opco and Zakum Development Company (Zadco), both operate offshore. The main offshore contribution to the capacity expansion will come from Zadco, in which ExxonMobil now has a 28% stake. Amec is the programme manager for the project to increase Zadco’s output by 250,000 b/d to 750,000 b/d.
The United Arab Emirates (UAE) is the third-largest oil producer in OPEC (after Saudi Arabia and Iran, and just ahead of Kuwait and Venezuela). UAE output (in effect Abu Dhabi’s) averaged about 2.7m b/d in 2008, but is supposed to come down by about 500,000 b/d as part of the new OPEC target, which calls for a total 4.2m b/d cut from September levels. OPEC has acted in the face of a sharp reduction in global oil demand, with no significant recovery anticipated until 2010 at the earliest. However, there are still concerns about the adequacy of global supply in the medium term, owing to the rapid rates of depletion, and sluggish investment in both exploration and development of new capacity. ADNOC’s commitment to its own capacity expansion programme will provide some, albeit, limited reassurance on that score.