NOC Survey 2008: Abu Dhabi National Oil Company

04 July 2008
Meeting its ambitious production targets is the main challenge for Abu Dhabi.

Abu Dhabi National Oil Company (Adnoc) has one of the most multi-faceted plans of all the NOCs in the region. With aims to achieve a crude production capacity of 3.5 million barrels a day (b/d) by 2015, plus an ambitious gas, downstream and overseas programme, the NOC is also one of the most active.

Adnoc is one of the most private of the region’s NOCs, and rarely makes public statements about its future plans. But this has not stopped it from moving forward on several fronts that could transform it into one of the world’s most significant oil companies.

Unlike some other regional NOCs, Adnoc has retained its partnerships with international oil companies that hold minority stakes in its various operating firms, such as Zakum Development Company (Zadco), Abu Dhabi Company for Onshore Oil Operations (Adco) and Abu Dhabi Gas Industries Company (Gasco).

CompanyAbu Dhabi National Oil Company
Oil Reserves97.8 billion barrels
Oil Production 20072.9 million barrels a day*
Gas Reserves215 trillion cubic feet
Gas Production 200749.2 billion cubic metres
*includes NGLs. Source: BP Statistical Review 2008

This has served Abu Dhabi well, enabling it to retain advanced oil and gas production technologies and managerial expertise, and to share risk.

In turn, this has helped it develop relationships that have proved useful in international and downstream ventures.

Adnoc differs from other regional NOCs because a substantial portion of its oil and gas production is from offshore fields. Offshore production is key to its growth plans. Through Zadco, Adnoc is engaged in a five-year crude increment plan to increase production capacity to 750,000 b/d from 500,000 b/d. The scheme will be implemented with the assistance of ExxonMobil Corporation, which took a stake in Zadco two years ago.

Offshore gas is a critical element of the multi-billion-dollar integrated gas development to produce an additional 720 million cubic feet a day (cf/d) of gas from the Umm Shaif field.

Onshore, crude output increases are centred on two major projects: the full-field development of the Sahil, Asab, Shah (Sas) reservoirs, and the 1.8 million scheme to raise production from several different fields.

But it is gas that has taken the spotlight, thanks to the tight competition among IOCs for the Shah sour gas concession to produce up to 1 billion cf/d of sour gas from the field. No official announcement has yet been made, but the US’ ConocoPhillips is widely tipped for the job.

Overseas investment

After a slow start overseas, Abu Dhabi is making up for lost time on several fronts. Through its International Petroleum Investment Company (Ipic), it is investing in refineries in Morocco, Pakistan and Fujairah, and has bought a large stake in Japan’s Cosmo Oil.

Abu Dhabi National Energy Company (Taqa) has invested in upstream production companies and assets in Canada and Europe, while Mubadala also has regional oil and gas assets.

Respondents to MEED’s NOC survey generally praise Adnoc, citing its overall performance, production capacity and international partnering as strong points. If there is one area where it falls down, it is in transparency and government control. “There is a lack of transparency and inter-departmental co-ordination along with proper information,” says one respondent. Another cites “poor processes, which held it back”.

On the contracting side, Adnoc has been less keen to innovate than other NOCs in the region, sticking to the standard lump-sum formula. Until now, this does not seem to have negatively affected it too much, with most major projects remaining competitive.

This conservatism is transferred to prequalification lists, with the sector still largely the domain of the traditional US, European and Japanese engineering, procurement and construction (EPC) contractors. South Korean firms, which have made major inroads into other countries, still find it difficult to win work in the emirate.

As with most other NOCs, the majority of respondents report delays in the contracting process of one to five months. Reasons for the delays range from bureaucracy and a lack of bids, to labour procurement difficulties and cost issues.

One respondent cites the “lack of com-munication between the operating companies and Adnoc” as one of the prime reasons for delays.

Downstream, Adnoc does not have the same kind of large-scale investment programme as Aramco, Qatar Petroleum (QP) or Kuwait Petroleum Corporation (KPC). Its ambitions are restricted to the 400,000-b/d grassroots expansion of its Ruwais refinery through Abu Dhabi Oil Refining Company (Takreer).

However, the same cannot be said for petrochemicals. At Taweelah, the emirate is planning the largest petrochemicals complex ever built, as well as further expansions of the Abu Dhabi Polymers Company (Borouge) olefins complex at Ruwais and the Ruwais Fertiliser Industries (Fertil) urea complex. Adnoc is also planning a lube oil plant with Finland’s Neste.

Gaining expertise

The development of human resources has been aided by the sustained presence of IOCs in the domestic sector. Adnoc employees are continually seconded to its partners, providing them with valuable expertise.

The NOC’s staff are highly regarded and are often put in other senior jobs in the emirate’s non-oil sector. However, some respondents say the quality of staff and inter-departmental co-ordination are areas where the company could most improve.

The NOC is also known for being highly politicised, with decision-making regularly outside its control and in the hands of
external figures, who often take time to form a consensus.

The environment and health and safety issues will be paramount, especially as Adnoc gears up for sour gas production. Sour gas is extremely volatile and needs to be handled carefully to avoid explosion. Its production also creates the problem of how to handle its sulphur by-products.

The sour gas scheme highlights Adnoc’s willingness to enter areas in which regional NOCs have been reluctant to operate.

Nothing better exemplifies this than its plan to buy carbon dioxide and use the gas for reinjection processes, freeing up gas currently used for the purpose to be used in cleaner-burning power generation.

Adnoc’s formation of a joint venture firm for the production of nitrogen, also to be used for gas reinjection, highlights a similar innovation.

With a small population and some of the world’s largest oil and gas reserves, the challenge for Adnoc going forward will not be finding the cash to deliver its plans, but the necessary drive to implement them.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications