After Saudi Arabia, the UAE ranks along with Kuwait as the GCC’s biggest oil producer. It is the region’s oldest gas exporter, having dispatched its first cargo of liquefied natural gas (LNG) from Das Island in 1977, but one of the youngest petrochemicals producers, having only made its first shipment of polyethylene in 2002.

In recent years, the UAE has faced an increasingly tight gas market, which has forced it to import gas and to press ahead with the GCC’s first nuclear energy programme.

Uneven distribution

The UAE’s hydrocarbon riches are unevenly spread, with Abu Dhabi accounting for more than 95 per cent of total reserves and production. Until the mid-1990s, Dubai was producing 400,000 barrels a day (b/d), but has since seen output slump to 50,000-70,000 b/d due to depleting reserves. It is a similar situation in Sharjah, where both oil and gas production have plummeted from the peaks of the mid-1990s. None of the other northern Emirates has significant hydrocarbon assets.

The UAE is targeting sustainable production of 3.5 million b/d by 2017/18, with most of the additional capacity coming from Abu Dhabi’s offshore fields, compared with about 2.6 million b/d in 2012.

International oil companies have played a major role in the development of the UAE’s oil and gas industry. Unlike elsewhere in the GCC, they have been a constant presence in Abu Dhabi over the past five decades and today all of the major upstream operating companies, along with the downstream fertiliser and petrochemicals ventures, have foreign partners in their shareholding.

This enables Abu Dhabi National Oil Company (ADNOC) to access their expertise and technology. However, several upstream concession agreements are up for renewal over the coming decade, with a new onshore concession expected to be formed in early 2015.

Since 2007, the UAE has been the second-largest hydrocarbons projects market in the GCC behind Saudi Arabia. This is mainly due to unprecedented activity in 2009, when Abu Dhabi took advantage of the slump in materials and contractor pricing to award more than $30bn-worth of engineering, procurement and construction (EPC) contracts in the upstream and downstream sectors.

The focus now will be on upping upstream oil capacity offshore, boosting gas production and developing additional petrochemicals capacity based primarily on liquid streams.

Abu Dhabi’s onshore fields represent the majority of the emirate’s upstream capacity, accounting for 55-60 per cent of the total. Abu Dhabi Company for Onshore Oil Operations (Adco) produces an estimated 1.4 million b/d from Asab, Bab, Bu Hasa, Sahil, Shah and the North East Bab fields, which are all located in Abu Dhabi’s western desert.

The company recently completed a major expansion programme under the ‘1.8 million b/d’ programme and the Shah-Asab-Sahil project. Adco’s current expansion projects include the third-phase development of the North East Bab fields and new field developments at Sahil, Qusahwira and Mender.

The biggest recent onshore contract was part of the North East Bab phase 3 – a $1.44bn EPC contract to develop the Rumaitha and Shanayel fields, awarded to a consortium of South Korea’s GS Engineering & Construction and UAE-based Dodsal.

Adco is currently assessing bids for the expansion of the third North East Bab field, Al-Dabbiya, and is set to award the contract later in 2014.

Offshore spending

But the majority of spending in Abu Dhabi’s oil industry in recent years has been in the offshore sector, with the state-backed Abu Dhabi Marine Operating Company (ADMA-OPCO) and Zakum Development Company (Zadco) taking on major expansions.

Adma-Opco has awarded about $8bn-worth of EPC deals on offshore oil field developments since the start of 2012, mainly on the full field developments of its Nasr, Satah al-Razboot (Sarb) and Umm al-Lulu fields.

All three projects have main packages worth in excess of $1bn that were awarded to groups led by South Korea’s Hyundai Heavy Industries (Nasr) and Hyundai Engineering & Construction (Sarb), and the local National Petroleum Construction Company (Umm al-Lulu).

Zadco awarded about $4.6bn in EPC contracts in the same period. This spending was dominated by the $3.79bn deal given to the UK’s Petrofac and South Korea’s Daewoo Shipbuilding & Marine Engineering.

Abu Dhabi is in the process of completing the Gulf’s first major sour gas project to meet growing gas demand from the power and industrial sectors. While the $10bn scheme is being commissioned the emirate is preparing to undertake a second sour gas project of a similar size.

In April 2013, UK/Dutch Shell was chosen to partner Adnoc in Abu Dhabi’s second sour gas development at the Bab field. Shell took a 40 per cent stake in the new joint venture to develop the Bab sour gas reservoirs, located 150 kilometres southwest of Abu Dhabi city. The estimated $10bn development is expected to have a capacity of about 1 billion cubic feet a day of sour gas, which will be processed to a smaller amount of sales gas and associated sulphur and liquefied petroleum gas.

The development of additional sour gas deposits has been discussed, with most attention focused on the shallow offshore Hail field or a further expansion of Shah.

The UAE has an installed refining capacity of 688,000 b/d, making it the third-biggest refiner in the GCC after Saudi Arabia and Kuwait. In 2014, refining capacity will exceed 1 million b/d for the first time when the $10bn expansion of Abu Dhabi Oil Refining Company’s (Takreer) Ruwais refinery in western Abu Dhabi is completed.

A new refinery is planned in Fujairah by Abu Dhabi’s International Petroleum Investment Company (Ipic). First unveiled in 2007, the 200,000-b/d refinery was originally to be implemented in joint venture with ConocoPhillips, although following the US major’s withdrawal, Ipic has pursued the estimated $3.5bn project on its own.

Ipic recently received EPC bids from several South Korean companies for the main processing package for the facility. It remains unclear whether it will take on board a new partner. In the past, Takreer has also looked at building a refinery in the emirate, but dropped the idea in favour of developing its Ruwais site.

Chemicals complex

Planned expansion in Abu Dhabi’s petrochemicals industry has slowed down somewhat in recent years due to restrictions on gas availability, but the emirate’s long-awaited aromatics chemicals project looks set to move into the tendering phase after a new joint-venture agreement with Singapore-based chemicals group Indorama was signed in December 2013.

Abu Dhabi National Chemicals Company (Chemaweyaat) inked the deal, which will see the two companies develop a $1bn-plus complex in the Al-Gharbia (Western) region.

Oil, gas and petrochemicals spending in the UAE is forecast to slow after the offshore push by Adma-Opco and Zadco, but there are still several major projects on the horizon in all sectors of the country’s hydrocarbons industry.