Adnoc Delays Pipe on $10B Gas Devt; Schedule Uncertain

DUBAI (Zawya Dow Jones), Jun. 17, 2009

Abu Dhabi National Oil Co., or Adnoc, delayed plans to invite bids for the world's longest sulfur pipeline, casting doubts over the schedule of its crucial $10 billion Shah sour gas field development, people familiar with the project said.

State-run Adnoc and its joint venture partner in the project, ConocoPhillips (COP), earlier this month released nine tender packages on the large-scale project but delayed one covering essential construction of the Shah-Ruwais liquid sulfur pipeline, the United Arab Emirates-based people told Zawya Dow Jones this week.

Due to the pipeline's importance any delay could undermine plans for the project's scheduled completion in 2013, a person close to Adnoc said.

"The pipeline has to work. There's no other option. There will not be a project otherwise because there has to be an outlet," the source said.

The Shah development is essentuial to help Abu Dhabi meet gas demand in the Middle East's second-largest economy, which has surged as the government builds gas-fired power stations, desalination plants and develops industries such as petrochemicals.

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 field contains large reserves of sour gas, which is highly corrosive and more costly and challenging to process because it requires special handling and infrastructure.

Adnoc didn't respond to emailed questions from Zawya Dow Jones.


Package six, one out of a total 10 packages, covers a 136-kilometer pipeline to carry sulfur from the Shah gas field to Ruwais -- via Habshan -- where the sulfur is to be granulated. The package wasn't released for bidding due to a lack of suitable bidders, industry sources said.

"All the packages were issued on June 10 except package six for the world's longest sulfur pipeline. It's more than 100 kilometers and nobody has that sort of experience," one industry official said.

"It's a major package and they are still wondering what to do with it," the official added. Without the planned pipeline, the highly flammable sulfur would have to be transported by road through the desert, raising safety concerns, he said.

The other tender packages released for bidding on Shah last week cover gas gathering and processing plants, sulfur recovery units and utilities among other facilities.

About "$10 billion is the estimate for all the packages together, but individually we still do not know," one industry source said, adding that technical bids for the issued packages are due in October.

Industry sources said companies including GS Engineering, SK Engineering, Saipem SpA and National Petroleum Construction Co. are among the companies expected to bid for package one, one of the project's largest contracts, covering gas gathering facilities.

Chiyoda Corp., Saipem, Technip S.A. and Fluor Corp. are expected to compete for another major contract, package two, comprising the gas processing plant, to be located at the Shah field, the sources said.

Package three covers the construction of sulfur recovery units, while package four is for utilities and offsites. Package five is for one 36-inch, 129-kilometer gas pipeline and two 16-inch, 67-kilometer pipelines for condensate and natural gas liquids, or NGL, transport.

A seventh package is for the construction of a sulfur handling terminal, with package eight covering the dredging of a channel at Ruwais. Package nine involves early works at the Shah plant site and at Ruwais, while package 10 covers non-process buildings.

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

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