Occidental to Bid for $10B Abu Dhabi Sour Gas Project

DUBAI Apr 04, 2007 (Dow Jones Newswires)

Occidental Petroleum Corp. (OXY) will bid in mid-April for an estimated $10 billion sour gas development in Abu Dhabi while BG Group PLC (BRG) will not pursue the project any further, company officials have said.

Abu Dhabi National Oil Co., which produces almost all the oil in the United Arab Emirates, has pre-qualified a number of international oil companies including Occidental, BG, BP PLC (BP) and Royal Dutch Shell PLC (RDSA.LN) to submit bids for the project by April 15.

Occidental is among the companies preparing to submit a final proposal on how to develop the scheme, which will be seminal in helping the U.A.E.'s largest emirate meet its fast-rising gas requirements.

"I'm sure we'll submit a proposal," Occidental Chief Financial Officer Steven Chazen told Dow Jones Newswires at a New Orleans energy conference Tuesday.

While Occidental, BP and Shell are expected to hand in bids later this month, BG has decided to pull out of the race.

"We were obviously delighted to be shortlisted and invited by Adnoc to bid for what is a very challenging sour gas project," a BG spokeswoman told Dow Jones Newswires in an email Tuesday.

"However, in the time available we concluded that we were not able to put together a sufficiently competitive compliant bid to address the significant challenges this project presents. Given our experience with sour gas in projects like Karachaganak in Kazakhstan, we are disappointed that we felt unable to submit a bid," the spokeswoman said.

It is not clear whether Exxon Mobil Corp. (XOM) and Total SA (TOT), which have also been pre-selected by Adnoc, will participate in the final stage of the tender.

The successful bidder will enter into a joint venture with Adnoc to help it develop some of Abu Dhabi's fields containing sour gas, highly sulfuric natural gas that is more costly and challenging to process because its corrosive nature requires special handling and infrastructure.

Abu Dhabi has more than 200 trillion cubic feet of gas reserves, the fifth largest in the world, most of which are sour.

Demand for natural gas is rising fast in the U.A.E. as the government is moving ahead with the addition of new, gas-fired power and desalination plants, and the development of new industries with high gas requirements, such as aluminum and petrochemicals.

The sour gas project, which is expected to produce 3 billion cubic feet a day of gas, is set to provide gas for these new industries and for reinjection in oil fields to maintain production levels.

Copyright (c) 2007 Dow Jones & Company, Inc.


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