UAE's largest onshore oil project faces long delay

02 December 2015

Tender cancelled on estimated $3bn Bab expansion after assessment of commercial bids

The UAE’s largest planned onshore oil development faces delays of more than a year after project owner Abu Dhabi Company for Onshore Petroleum Operations (Adco) cancelled the tender for the main contract.

Adco received commercial engineering, procurement and construction (EPC) bids for seven companies for the Bab integrated facilities expansion on 29 June, but has decided to downsize the scope and restart the bidding process at a later date, according to sources familiar with the scheme.

Spain’s Intecsa Industrial is understood to have submitted the lowest-priced bid of about $3bn, with Italian group Saipem emerging as the second-lowest bidder.

According to industry sources, the contract was not awarded for several reasons, including doubts over the ability of Intecsa – a relative newcomer to the region’s oil and gas sector – to carry out such a large-scale project. At the same time, one of Adco’s international shareholders was concerned the investment was too large for the amount of additional oil recovered.

“Adco has decided to reduce the scope and start again the full tendering procedure,” a source familiar with the project tells MEED.

“Adco is developing the modifications to the front-end engineering and design (feed) ‘in house’ and will invite the contractors for the EPC possibly in the third quarter of 2016,” the source says.

When Adco originally shortlisted the bidders, the estimated price of the tender was just over $2bn. However, the budget increased due to additional requests from Adco and the difficult logistics of the work, according to one source.

If Adco had awarded the contract at about $3bn, it would have been the large onshore oil project deal in the UAE for at least a decade,

The work involves installing new facilities at Adco’s Bab field, located 160 kilometres southwest of Abu Dhabi city. As part of the original scope, surface facilities will be delivered for the Thamama-A, Thamama-H and Thamama-B production zones to achieve a total sustainable oil production rate of 450,000 barrels a day (b/d).

However, the revised scope is expected to limit oil gathering to a reduced number of wells.

The field is sour, with high hydrogen sulphide content, and Adco injects aquifer water into the producing zones to maintain pressure. Associated gas is separated at the Bab Central Degassing Station (BCDS) and delivered to Abu Dhabi Gas Industries (Gasco) for processing. Processed crude is pumped to the Adco export network.

Adco is a joint venture of Abu Dhabi National Oil Company, France’s Total (10 per cent), Japan’s Inpex (5 per cent) and South Korea’s GS Energy (3 per cent). The onshore operator is expected to award more stakes to bring the interest held by international oil companies to a total of 40 per cent.

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