Abu Dhabi considers offshore deep gas licensing round

07 November 2008
Shell could lose out on exploration and development deal to rival oil majors.

Energy majors expect Abu Dhabi to launch a multi-billion-dollar offshore deep gas round next year, which could see the UK/Dutch Shell Group losing out on a deal to develop its reserves.

Abu Dhabi National Oil Company (Adnoc) signed a preliminary deal with on 3 November for the initial evaluation of offshore deep gas prospects (MEED 3:11:08).

Shell expects to begin joint exploration and development on the completion of the study, but a source close to Adnoc tells MEED that the work will now be tendered to oil majors in a similar way to the Shah sour gas scheme.

“You are looking at a big area with many prospects, so it is likely to be turned into a bid round situation eventually,” says the executive source. “Much of what we decide will depend on the results of this initial study, which Shell is carrying out.”

He adds that Shell may be able to develop certain sections of the acreage itself, but that this had yet to be determined.

The proposed bid round is expected to include offshore gas structures which have yet to be developed, along with some sour gas reserves.

Rival UK oil major BP says it expects Adnoc to follow the model it has created with recent onshore bidding for sour gas this year.

“As we understand it, it [Shell’s deal] is not to access acreage. It is a deal to do a study and we think it may be opened up to competitive bidding after that,” Steve Peacock, Middle East exploration and production head at BP, tells MEED.

Shell will be wary of the gas deposits being opened up to competitive bidding as it could lead to it losing out on another high-profile contract in the emirate. The oil major was one of the early favourites to win the $10bn-plus award for Abu Dhabi’s onshore Shah gas field earlier this year, after conducting all of the initial engineering and conceptual work on the sour gas potential.

However, Adnoc eventually opted for the US’ ConocoPhillips to carry out the work instead (MEED 11:1:08).

The next phase of Adnoc’s overall sour gas development is expected to be at its onshore Bab field. Bab was originally included as part of the Shah scheme but was separated off because of cost and safety issues.

France’s Total is understood to be the frontrunner for the field, although it is unlikely to proceed until work starts on Shah.

The development of its substantial sour gas reserves is a key part of Abu Dhabi’s policy to ensure it has enough gas supply to meet its growing power requirements.

Demand for gas is growing by 15-20 per cent a year in the emirate, and despite the recent addition of gas from the Dolphin pipeline, the authorities are continually seeking further supplies.

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