Dubai has a long history of oil production despite being overshadowed by its larger, resource-rich neighbour Abu Dhabi.

The emirate is estimated to hold some 4 billion barrels of oil – about 4 per cent of the country’s reserves – making it the second-largest source of oil in the UAE, but daily production has fallen considerably as its major fields have matured.

The main oil producer is state-owned Dubai Petroleum Establishment (DPE), which was set up in 1963 to start exploring for crude offshore. Oil was first discovered at the Fateh field in 1969 and three years later, the first export shipment left the emirate.

DPE is incredibly guarded, even compared with the notoriously tight-lipped national oil companies elsewhere in the GCC. Since the group was nationalised in 2007, it has not announced its annual production figures or any development projects.

Declining production

It is estimated that Dubai’s oil production peaked at about 410,000 barrels a day (b/d) in 1991, and has been gradually declining since. The emirate is now thought to be pumping crude volumes at a rate of 50,000-70,000 b/d.

The production largely comes from four offshore fields – Fateh, Southwest Fateh, Falah and Rashid – and reflects diminishing returns that are only expected to last another 15-20 years. DPE is focused on maximising offshore recovery from its existing fields, while exploring for new reserves both onshore and offshore.

Dubai’s Supreme Council of Energy has overseen oil and gas policy in the emirate since 2009. Its board includes representatives of all the major state-owned bodies active in the hydrocarbons field including DPE, oil refiner Emirates National Oil Company (Enoc), and Dubai Supply Authority (Dusup), which is responsible for procuring and transmitting gas across the emirate.

Key fact

Dubai is now thought to be pumping oil at a rate of 50,000-70,000 b/d

b/d=Barrels a day. Source: MEED

 

In 2009, Dusup took over the Margham Dubai Establishment. The company produces condensate from the onshore Margham field and, as of 2010, was estimated to be pumping about 25,000 b/d of condensate. This field was first discovered in 1982 and started production in 1984. Enoc’s Jebel Ali condensate refinery has a processing capacity of 120,000 b/d. A current project will expand this to 140,000 b/d.

Dubai is one of the highest per capita consumers of energy in the world and its rapid population growth has seen demand far outstrip domestic oil and gas production. The increasingly limited gas market in the UAE has pushed the emirate to build an LNG receiving terminal at Jebel Ali, which was completed in the fourth quarter of 2010 and is operated by Dusup.

Jalilah field

Only three significant projects have taken place on Dubai’s offshore fields in the past five years. Most recently, DPE started construction on facilities at the offshore Jalilah field. The field is located 90 kilometres off the coast of Dubai at a water depth reaching 60 metres. It was first discovered off the coast of Dubai in February 2010, next to the existing Rashid field.

France’s Technip was awarded a contract on the Jalilah B offshore oil field development project in January 2014. The engineering, procurement, installation and construction (EPIC) deal was worth between e100m ($106m) and e250m, according to Technip.

The scope of work includes the construction and installation of the Jalilah B platform, a 900-tonne deck, a 500-tonne jacket and 13 new risers on existing platforms. It also includes the installation of 110km of pipelines ranging from 6 to 24 inches in diameter.

For the first phase, DPE awarded the EPIC contract for the production facilities in September 2010 to a consortium of US-based Global Industries and the local Lamprell. Technip acquired Global Industries in 2011.

Sources with knowledge of the project estimated that the first phase would produce about 5,000-10,000 barrels a day (b/d) of oil, but this could not be confirmed by DPE.

Technip also won another major recent construction project in Dubai’s offshore oil industry from DPE. In mid-2012, the French group was awarded an EPIC deal to replace a 12-inch gas pipeline and six 18-inch water injection pipelines at the Southwest Fatah and Falah fields. The company’s operating centre in Abu Dhabi carried out the contract, which was completed in mid-2013.

Maintenance work

DPE also contracts overseas firms to carry out operations and maintenance (O&M) on its assets. The US’ McDermott won an estimated $10m-$15m-a-year deal in 2012 that sees the company supply personnel in what is estimated to involve 50,000-70,000 man hours of work.

Four firms submitted bids, including McDermott International, the UK’s Petrofac, France’s Technip and Australia’s WorleyParsons. Petrofac won DPE’s first O&M contract in 2006, involving well and facilities management for four offshore fields and about 70 platforms.

Dubai’s upstream oil and gas sector has played an important role in the emirate’s economic progress over the past 30 years. But with reserves depleting, hydrocarbons production is taking an increasingly smaller position in the emirate’s highly diversified economy, now based on trade, transport, tourism and finance.

As it stands, Dubai’s oil and gas fields do not have major potential for future development, but the emirate has become an important centre for services to the regional hydrocarbons sector. Even without the vast resources of its neighbours, Dubai still stands to benefit significantly from oil and gas growth in Abu Dhabi, Saudi Arabia, the GCC and the wider Middle East.