ADNOC, ConocoPhillips Issue Tenders for $10B Shah Gas Devt

ABU DHABI (Zawya Dow Jones), May 25, 2009

Abu Dhabi National Oil Co. and ConocoPhillips (COP) have invited bids for four contracts on the estimated $10 billion Shah sour gas field development, which is set to help Abu Dhabi meet rising gas demand, Adnoc's chief executive said Monday.

"Four tenders related to the development of the Shah field have been issued to contractors," Yousef Omair bin Yousef told the audience of the Abu Dhabi Gastech 2009 conference.

Bin Yousef said the contracts are part of plans to award energy deals worth between $35 billion-50 billion in 2009 and 2010. He added that the world economic crisis had "created a window of opportunity" to implement projects at a "lower cost and "better quality."

"This financial crisis caused many companies and countries producing or consuming energy to downsize and economize, consequently this led to weakness in world demand and a decrease in the oil price, leading to problems in expansion and execution of projects. In Adnoc, we look at the bright and positive side of the crisis," Bin Yousef said.

According to Ismail Al Ramahi, manager for the gas processing division at Adnoc's exploration and production directorate, the spending plans cover all energy projects in Abu Dhabi, including refining, natural gas and petrochemical developments among others.

"We need more contractors. We're moving very fast," Al Ramahi told reporters on the sidelines of the conference.

State-run Adnoc hopes to achieve savings of as much as 50% on its projects as cost for equipment and materials such as steel have slumped amid the world economic crisis, he added.

"We hope to save 30-50% on the original cost," Al Ramahi said.

The cost to develop the Shah field is expected to be around $10 billion, down 30% from earlier estimates of about $13 billion, he said.

The four engineering, procurement and construction, or EPC, contracts now out for tender on the sour gas field development are expected to be awarded by year end or in early 2010, Al Ramahi said.

Sour gas is highly corrosive and generally more costly and challenging to process because of its high sulfur content, which requires special handling and infrastructure. Abu Dhabi, with more than 200 trillion cubic feet of gas reserves, boasts one of the biggest gas basins in the world, but much of it is sour.

The Shah development is crucial to help Abu Dhabi, the largest of seven emirates that make up the U.A.E., meet gas demand, which has surged as the government builds gas-fired power stations and desalination plants, and develops industries such as petrochemicals that use gas in the production process.

The four contracts released for tender cover the field's upstream development, sulphur recovery units, utilities and processing facilities, Al Ramahi said. A total of eight packages will be tendered by Adnoc and ConocoPhillips as part of the Shah development, he added.

The development of a second sour gas field in Abu Dhabi emirate, Bab, is being studied, Al Ramahi said.

Contract awards are due "within a few months" on another project aimed at boosting gas output in Abu Dhabi, the Integrated Gas Development, or IGD, Al Ramahi said. The project will bring offshore gas onshore to distribute through the national grid.

Presently, Abu Dhabi uses about a third each of its available gas for injection in oil fields, industrial use and power plants.  

Copyright (c) 2009 Dow Jones & Company, Inc.


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