Abu Dhabi has invited four international oil companies to bid in the revised competition for one of the largest projects this year open to companies vying for limited access to the Middle East energy sector.
ConocoPhillips, ExxonMobil, Occidental Petroleum Corp and Royal Dutch Shell are all on the shortlist for the multi-billion dollar project to develop sour gas reserves at the Shah field, industry sources said today. The United Arab Emirates is one of the few regional energy resource holders with projects available to international oil companies.
Saudi Arabia, home to the world’s largest oil reserves, keeps its oilfields closed to international firms and in Qatar, Kuwait and Iran, new projects are either on hold or stalled for political reasons.
Revised bids for the Shah field were due in by the end of August to state-run Abu Dhabi National Oil Company (ADNOC), industry sources have said. ADNOC is expected to choose a lead partner shortly after the new bids are submitted as it needs to bring online new gas supplies quickly to meet spiraling demand.
Record oil revenues have fuelled economic expansion and boosted demand for gas from the power sector and heavy industry. "They want to move ahead quickly," said one source. "They will really need the gas."
The winner will take a 40% stake in the project, while ADNOC will hold the rest.
Industry sources were unable to give a cost estimate for the Shah development alone. The initial tender in April was to develop gas reserves in both the Shah and Bab fields and had an estimated cost of around $10 billion. The complexity of developing both fields led Abu Dhabi to split them into separate projects. United Arab Emirates Energy Minister Mohamed al-Hamli said the Bab field may be developed later.
Eight companies bid in April and the four that ADNOC has not asked to bid again for Shah are BP, Total, the Japan Oil Development Company – JODCO and Wintershall, a subsidiary of German chemical company BASF.
The Shah field is potentially more attractive for Abu Dhabi to develop ahead of Bab due to its high levels of natural gas liquids (NGLs), suggested Colin Lothian, a senior analyst for the Middle East at global consultancy Wood Mackenzie. "The substantial revenues generated from NGLs could be used to recover a large proportion of the overall development cost. This would have the benefit of providing gas at a considerable lower unit cost than a ‘dry’ gas project such as Bab."
Total bid for the Bab field alone in the April tender and remains interested in that project, its spokeswoman said. "I can confirm that we did not want to bid on Shah but that Total is interested in the Bab project," Paris-based spokeswoman Patricia Marie told Reuters. Total’s technology was more suited to Bab than to Shah, she added.
For other companies, the onshore Bab field was seen as more complicated, partly because it is closer to built-up areas.
The sour gas in the two fields has a content of around 30% of deadly hydrogen sulphide, making it tougher and more dangerous to produce than more conventional gas reserves. "This is dangerous stuff," said one source. "It can kill if it leaks. You have to be careful how far away you are from other operations and populations."
The UAE holds the world’s fifth-largest gas reserves at nearly 214 trillion cubic feet and is the world’s sixth-largest oil exporter.