Occidental signs on for Shah gas venture

20 January 2011

US firm will take on challenging sour-gas development in Abu Dhabi

State energy firm Abu Dhabi National Oil Company (Adnoc) has signed a new joint venture agreement with US oil major Occidental Petroleum for the estimated $10bn development of its sour-gas resources at the Shah field.

The signature of Occidental for the scheme fills a major gap in skills and technology left by the departure of ConocoPhillips, another US oil major, in April 2010. Beating proposals from the UK/Dutch Shell Group, as well as US rival ExxonMobil, Occidental will take a 40 per cent stake in the Shah gas project.

Shell had been widely tipped to win the race for the project as a stakeholder in Abu Dhabi Gas Industries (Gasco), the Adnoc subsidiary, which had been overseeing the tendering process for the sulphur projects (MEED 13:1:11).

“It’s not a great surprise that Occidental won it. Shell were favourites, but Occidental is well connected with Mubadala [Abu Dhabi’s energy investment vehicle] and it seems that relationship has paid off,” says a source close to the project.

The source would not reveal the terms of the agreement, but industry analysts speculate that they would have to be an improvement on the deal offered to ConocoPhillips before its withdrawal. 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.

“It was never entirely clear why Conoco left the project, so it is hard to guess what the terms will be. But Occidental appear to be more committed to the region and in better financial shape then Conoco were last year,” says a source in Abu Dhabi.

The partners will produce 1 billion cubic-feet-a-day (cf/d) of sour, or sulphur-rich, gas from the southern Shah field, about 180 kilometres from Abu Dhabi. After separating the sulphur from the natural gas, the scheme is expected to produce 650 million cf/d of dry-gas. The sulphur by-product will be transported to granulation and distribution facilities at the Shah and Habshan fields and then onto Ruwais on the Gulf coast.

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