State-owned Abu Dhabi National Oil Company (Adnoc) is set to decide on a new partner for its planned $10bn-plus Shah gas project.
Three international oil firms (IOCs) – ExxonMobil and Occident from the US and UK-Dutch Shell Group – are competing to sign onto the deal, which the US’ ConocoPhillips left in April 2009.
The winner would take a 40 per cent stake in a Shah joint venture to produce 1 billion cubic-feet-a-day (cf/d) of sour, or sulphur-rich, gas from the southern Shah field before separating the sulphur from the natural gas and transporting both to processing and distribution facilities at Habshan and Ruwais.
Industry sources in the UAE say Adnoc certainly needs an IOC partner to develop its technically challenging resource, but will have to improve on the deal offered to ConocoPhillips if it is to secure another signature.
Last year, sources close to the joint venture told MEED that Conoco was only given access to the sulphur, condensates, and natural gas liquids produced at the Shah field making it only profitable with oil prices above $80-90 a barrel. ConocoPhillips’ exit in April, after a year of dragging its feet on a final investment decision left Adnoc looking for another technically skilled partner and was expected to significantly delay its domestic gas supply strategy.
“Adnoc will have learnt their lesson from Conoco and will be working out a new formula so it is financially viable,” says an industry source.
Shell has been widely tipped as the mostly likely replacement, should the terms of the project be re-worked to make it more profitable. The oil major was closely involved in plans to produce gas from the Shah field before Conoco won the development deal in 2008.
More importantly, it is also a 15 per cent stakeholder in Abu Dhabi Gas Industries Company (Gasco), the Adnoc subsidiary, which has been overseeing the tendering process on the scheme for Abu Dhabi Gas Development Company, an Adnoc subsidiary.
“Shell probably stands the best chance. They are already partners in Gasco and have been interested in Shah since it was first mooted,” says a Dubai-based source.
Shell was initially a bidder to operate the project. France’s Total also showed interest in the project previously, although it withdrew its interest during the bidding stage.
The project involves the development of sour natural gas and condensate reservoirs in the southwest of the emirate. It includes building gas gathering systems and processing trains, as well as pipelines to transport 1 billion cubic feet a day (cf/d) of gas, along with condensates and sulphur by the end of 2013.
Gasco has already awarded two major sulphur production and handling projects to Italy’s Techint and India’s Dodsal (MEED 29:12:10).
Adnoc and the IOCs involved would not comment on the project.