Royal Dutch Shell has announced that it will pull out of a multi-billion-dollar plan for the Bab sour gas field in Abu Dhabi, reported Reuters.
Shell said that the decision was taken “following a careful and thorough evaluation of technical challenges and costs,” which led to the conclusion that the project was not suitable to the company in the “economic climate prevailing in the energy industry,” in reference to the downturn in oil prices. Suhail bin Mohammed Al Mazroui, the UAE’s Energy Minister, explained that his country was not worried about Shell’s pullout and understood the commercial logic behind the decision given that the “cost of gas and the price of gas and LNG has dropped more than 50%”.
This was a joint development project with Abu Dhabi National Oil Co (ADNOC), meant to yield 1bcf/d and aimed at domestic consumption. Shell won the tender for the project in 2013 for $10b, enjoying a 40% stake for a 30-year long venture, informed Trade Arabia. At the time, the deal was seen as a stalking horse for Shell’s larger ambitions to renew a concession to develop the UAE’s largest onshore oilfield.
Analysts have hailed Shell’s decision as a wise choice that avoided a high-cost, low-return project, despite the obvious political risks involved, straining long-term relations with countries. Shell had pulled out of several major projects last year due to the oil price slump, including the high-risk oil sands project in Canada.