Adnoc and ConocoPhillips sign sour gas deal

08 July 2008

Abu Dhabi National Oil Company (Adnoc) and US oil major ConocoPhillips have signed the long-awaited project agreement to develop sour gas reserves from Abu Dhabi’s onshore Shah field.

Under the terms of the preliminary agreement, signed on 8 July, Conoco and Adnoc will jointly produce and process more than 1 billion cubic feet of sour gas from the field.

Once processed and desulphurised, the gas will be used primarily for reinjection back into the reservoir to help maintain well pressure. This will help free up gas currently used for that purpose, which can instead be used for power generation and industrial requirements.

The cost of the project is expected to be more than $10bn, with the investment split jointly between the two companies. It is unclear how Conoco will make a return on its investment, but it is thought that it will be able to market and sell associated natural gas liquid and sulphur production from the concession.

The two firms say they will reach a full joint venture agreement by the end of the year. Ultimately, Adnoc will hold a 60 per cent stake in the development, with Conoco taking the remainder.

Conoco was shortlisted in January for the foreign partner position on the development. Its selection was surprising as the US’ Occidental Petroleum and the UK/Dutch Shell Group had been considered frontrunners (MEED 10:1:08).

When the Shah deal is finalised, Adnoc is expected to start negotiations for a similar deal with an international oil company for sour gas production from the onshore Bab field and then the offshore Hail field.

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