Abu Dhabi oil expansion backed by $52 bil in committed investment: execs

Abu Dhabi (Platts)--12 Nov 2013 215 am EST/715 GMT

Executives of the UAE's Abu Dhabi National Oil Company and affiliated operating partnerships have disclosed about $52 billion of investment commitments intended to achieve a government target of raising Abu Dhabi's oil production capacity to 3.5 million b/d by 2017, even as the emirate undergoes what promises to be a major shift in its concession structure.

The investment total includes major contracts already awarded in the past two to three years. But the bulk of the spending is planned for the next three years, as the UAE's major oil producing emirate intensifies its push to lift output capacity from its current level of, at most, 2.9 million b/d, mostly from aging fields with high depletion rates.

ADNOC Deputy Director of Strategy and Coordination, Omar al-Suwaidi, told delegates attending the Abu Dhabi International Petroleum Exhibition and Conference in the UAE capital Monday that its Abu Dhabi Marine Operating Company unit, or Adma-Opco, which operates a number of Persian Gulf fields offshore Abu Dhabi including the giant Lower Zakum and Umm Al-Shaif reservoirs, had $24 billion in spending commitments from its partners to raise total output to 1 million b/d from 600,000 b/d. The investment program is aimed at helping ADNOC hit its 2017 output capacity target, he said.

Adma-Opco is held by ADNOC (60%), BP (14.67%), France's Total (13.33%) and Japan's Jodco (12%). The group operates a decades-old offshore concession that expires in 2018.

At the same time, Abu Dhabi Company for Onshore Operations, or Adco, has committed to spending $13.6 billion on engineering, procurement and construction projects aimed at boosting production capacity to 1.8 million b/d by 2017 from its 2010 level of 1.4 million b/d, Suwaidi said.

Adco's current output capacity stands at 1.6 million b/d, the joint venture's CEO, Abdul Munim al-Kindy, told reporters on the sidelines of the conference Sunday.

The group, currently owned by ADNOC (60%), BP, ExxonMobil, Shell and Total (9.5% each), and Portugal's Partex (2%), operates the concession containing Abu Dhabi's major onshore oil fields under a 75-year contract expiring in early January 2014. The joint venture produces Abu Dhabi's main export crude, Murban.

Although the Adco operating entity and underlying concession may survive the imminent contract restructuring, details of its future ownership structure and terms of a new concession agreement are still far from clear. The Abu Dhabi Supreme Petroleum Council, which is responsible for awarding all Abu Dhabi oil and gas concessions, with ADNOC as technical adviser, is currently reviewing bids from existing and potential new international partners.

Zakum Development Company, or Zadco, the third major operating group responsible for pumping Abu Dhabi crude, is planning $15 billion of capital spending to raise output capacity from a group of offshore fields, including the giant Upper Zakum offshore field, to 1 million b/d from 615,000 b/d, Suwaidi said.

Earlier Monday, the group's senior vice president of development, Ali al-Marzooqi, told reporters on the conference sidelines that the group's international partners, ExxonMobil and Jodco, had committed to a $12 billion- $14 billion investment program to raise output capacity to 750,000 b/d by 2017. Beyond that, ADNOC was prepared, if necessary, to fund 100% of a further $1 billion of investment required to increase capacity further to 1 million b/d by 2020.

ADNOC holds a 60% interest in Zadco, which has existed as an international partnership since 1977. ExxonMobil, which joined the group in 2006 to facilitate a large planned expansion, has 28%, with Jodco retaining its historic 12%.

The current 20-year Zadco concession expires in 2026, but Marzooqi said he expected it to be extended to 2051. Such an extension would be granted if the existing shareholders agree to secure the sustainability of the new 2020 plateau production target for 25 years.

"Hopefully the shareholders will come on board," he said.

The ambitious development program for Upper Zakum involves eventually phasing out roughly 8,000 wellhead tower rigs currently pumping much of Upper Zakum's current crude output of 585,000-590,000 b/d from a shallow-water platform in the Persian Gulf. They are to be replaced by up to 1,008 more complex extended-reach wells, with radiating horizontal well-bores, based on four artificial islands. Between 80 and 90 such wells have already been installed, with an additional 250 planned to reach the 2017 production capacity target.

"The main investment will be for sustainability, for the gradual phase-out [of the platform-based rigs] and for topside facilities," Marzooqi said.

The island-based project design is expected to increase the efficiency with which Zadco can exploit the roughly 50 billion barrels of oil in place in Abu Dhabi's biggest, but arguably most technically challenging oil field, as well as reducing its environmental footprint. It allows well design, and critical hydraulic and power systems to be optimized and energy consumption to be reduced, Marzooqi told conference delegates.

--Tamsin Carlisle; --Edited by Deepa Vijiyasingam,

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