Abu Dhabi to miss production target

25 September 2009

Emirate’s aim of raising oil production to 3.5 million barrels a day is unlikely to be achieved until 2019

Abu Dhabi’s ambitious target of producing 3.5 million barrels a day (b/d) of oil is unlikely to be met until 2019, four years after state-owned Abu Dhabi National Oil Company (Adnoc) hoped to bring all the planned extra capacity on line.

MEED analysis reveals that the emirate will miss its target because a series of projects it originally planned to launch in 2007 and 2008 are only now going ahead. The emirate delayed the schemes to avoid the inflated construction costs that were prevalent before the global financial crisis began.

As a member of international oil cartel Opec, the UAE is subject to production quotas, and is currently producing about 2.2 million b/d, 650,000 b/d less than its maximum capacity, according to MEED’s research. Almost all its production comes from Abu Dhabi, with the other emirates responsible for only a tiny amount.

Abu Dhabi’s main exploration and production companies, Abu Dhabi Company for Onshore Operations (Adco), Abu Dhabi Marine Operations Company (Adma-Opco) and Zakum Development Company (Zadco), are all co-owned by Adnoc and a series of international oil companies (IOCs) (see charts).

The companies face difficulties because of the complexity of extracting oil from the emirate’s oil reservoirs, particularly the offshore Upper Zakum field, which Zadco is developing in partnership with the US’ ExxonMobil Corporation.

Zadco plans to increase production capacity at the field from 500,000 b/d to 750,000 b/d by 2015. It is also planning to tender a series of deals to increase prod-uction at Upper Zakum in 2010, with completion dates of between 2015 and 2018.

Abu Dhabi has tendered a raft of upstream projects this year and plans to tender more by the end of March 2010.

In January, Adco awarded $3.5bn worth of contracts to boost production at the Sahil, Asab and Shah fields by 60,000 b/d to the UK’s Petrofac, Spain’s TR and Athens-based Consolidated Contractors Company. The project is due for completion by the end of 2012.

Adco has also asked firms to submit commercial bids by 24 November for three of the four projects that make up the estimated $3bn ‘1.8 million’ scheme to boost onshore oil production in the emirate by 400,000 b/d to 1.8 million b/d by 2014. Contractors working in the country say the three projects will add 250,000-b/d of production capacity and they expect them to be awarded by January 2010.

Adma-Opco has also pushed through new schemes this year. In January, Netherlands-based Tebodin completed a front-end engineering and design contract for production facilities at the undeveloped Umm al-Lulu field, while France’s Technip won a similar deal for the Nasr field on 7 August.

Contractors expect Adma-Opco to award engineering, procurement and construction contracts worth more than $3bn to develop the two fields by the end of 2010. The fields will add 90,000 b/d of production by 2015 and 165,000 b/d by 2018, according to contractors close to the schemes.

If all Abu Dhabi’s schemes are successful, it should reach its target of raising production capacity to 3.5 million b/d by 2019.

“There will be some slippage of production, as is natural, but there will also be more projects to increase production at other fields over the year, so 2018 or 2019 looks possible for the 3.5 million target,” says a senior executive at one engineering firm that has worked extensively with Adnoc.

“That said, not all of these developments will be a total success, but it is clear that the deals Abu Dhabi is tendering show it is serious about boosting production.”

Research by analysts at US investment bank Morgan Stanley confirms that slipping production levels at existing fields in Abu Dhabi and a lack of interest from IOCs has made it harder for the emirate to boost production.

“Abu Dhabi has been forced to dramatically curb expansion projects that had been announced as recently as October 2007,” says the bank in a 16 September report, which was produced with the help of Sadad al-Husseini, an independent analyst and former head of exploration and production at Saudi Aramco.

Adnoc and its affiliated companies declined to comment.

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