Conoco, Adnoc Face Delays on $12B Shah Sour Gas Plans

DUBAI (Zawya Dow Jones), Jan. 7, 2010

ConocoPhillips and Abu Dhabi are struggling with delays on a $12 billion sour gas project in the sheikdom amid ongoing uncertainty over how to safely transport toxic material, people familiar with the plans say.

"There is a delay in one of the packages for the sulfur transportation," an Abu Dhabi-based official with knowledge of the project told Zawya Dow Jones. "The original design was based on a pipeline but now we are considering the rail option."

A joint venture of ConocoPhillips and Abu Dhabi National Oil Co., or Adnoc, originally planned to build the world's longest sulfur pipeline as part of the project that is vital for energy supply in the United Arab Emirates but failed to attract feasible engineering bids last year.

Officials from the joint-venture who are authorized to speak to media about the project didn't respond to questions about delays.

Canada's Westmar has been appointed to carry out front-end engineering design, or FEED, work for the rail option, the person said.

The companies decided to study rail transportation plans instead to take the sulfur from the Shah field over a distance of about 264 kilometers to Ruwais on the Persian Gulf coast via Habshan. In October, Union Railway Co., which is tasked with developing a 1,100
kilometer railway network across the U.A.E., said it is in talks with Adnoc on transporting the sulfur from Shah via freight train.


The Shah field development is essential to help Abu Dhabi meet gas demand in the emirate, which has surged as the government builds
gas-fired power stations, desalination plants and develops industries such as petrochemicals.

The project aims at producing 1 billion cubic feet a day of sour -- or sulfur-rich -- gas and stripping out the sulfur and transporting it to the processing and export facilities.

However, the plans have been held up due to the technical difficulties linked to developing the field's large reserves of sour gas, which is
highly corrosive and more costly and challenging to process as it requires special handling and infrastructure.

Most tender packages on the project were released to the market last year but the package covering the sulfur pipeline was delayed to
tackle the technical challenges. No contract awards have been made on the other packages so far.

"Conoco is still working in the joint venture," the official said, adding that the U.S. oil major is "actively working with Adnoc in partnership to develop this project."

The project is "at a critical phase" and "in the EPC bidding article," the official said without providing further details.

Adnoc wasn't immediately available for comment when contacted by Zawya Dow Jones. ConocoPhillips declined to comment.

Copyright (c) 2010 Dow Jones & Company, Inc.