The UAE pumped around 2.6 million barrels of oil per day (b/d) in 2007, somewhat less than its production capacity of 2.9 million b/d, and has plans to raise its daily production capacity to 3.5 million b/d by 2009 and to over 5 million b/d by 2014. The country's proven crude oil reserves stand at 98 billion barrels, or around 8 per cent of the world's total reserves. Abu Dhabi holds 94 per cent of this amount, or about 92.2 billion barrels. Dubai has an estimated 4 billion barrels, followed by Sharjah and Ra’s al-Khaimah, with 1.5 billion and 100 million barrels of oil, respectively. The country’s gas resources are estimated at 6.5 trillion cubic meters, the fifth largest after Russia, Iran, Qatar and Saudi Arabia.
Dubai produces around 140,000 b/d of oil (6 per cent of the country’s production) and substantial quantities of gas from offshore fields (with a major condensate field onshore); Sharjah is the third UAE hydrocarbon producer. On the East Coast, Fujairah is the second largest bunkering port in the world (handling about 1 million tons of fuel from neighboring countries per month). Natural gas has been gaining in importance as a local energy source, particularly with the Dolphin Energy gas pipeline from Qatar coming onstream, and it is increasingly used by households and local industries, including for power generation and water desalination. Exports of gas have also increased.
Oil and gas production in Abu Dhabi is primarily handled by the Abu Dhabi National Oil Company (ADNOC), or by subsidiaries in which ADNOC is the majority shareholder in partnership with international companies. The sharp rise in oil and gas prices on world markets, which began in 2004, continued through 2006 and into 2008, resulting in higher than anticipated revenues from oil and gas sales. The industry is making significant investments to upgrade drilling, processing and transport facilities so that strong demand can be adequately met. A measure of just how important the UAE's oil production is in terms of world supply is illustrated by the fact that the UAE is the world's sixth largest oil exporter and supplies 26 per cent of Japan's oil imports.
The UAE is pushing ahead with mega projects to lift its oil capacity above five million barrels per day within six years and maintain its position as one of the world’s top crude suppliers. ADNOC sources report that a large part of the increase would come from Umm Shaif and Upper and Lower Zakum fields.
A surge in its petrodollar income has encouraged the UAE to step up hydrocarbon projects, which also involve gas, refining and petrochemicals. Abu Dhabi has already awarded contracts to several foreign companies to develop its oilfields within long-term plans to expand capacity.
Industry sources put spending on the hydrocarbon sector at more than $20 billion in the next five years. Investments have exceeded $15bn over the past decade.
Lower and Upper Zakum
ADMA-OPCO aims to boost oil output capacity at its Lower Zakum oilfield by 100,000 b/d by 2010. The field produced around 280,000 b/d in 2006. The project will take capacity at the field from a projected 325,000 b/d in 2008 to 425,000 b/d in 2010. In early 2006 ExxonMobil was formally awarded a 28 per cent equity interest for 20 years in Abu Dhabi’s Upper Zakum oil field, the world's fourth-largest oilfield. ADNOC retained a 60 per cent share in the field and Japan Oil Development Company (JODCO) continues to hold the remaining 12 per cent. Upper Zakum contributes significantly to Abu Dhabi’s production and has potential for substantial production growth. ExxonMobil, with ADNOC and JODCO, will provide support to the joint operating company ZADCO, which aims to increase production to around 750,000 b/d from a level of around 550,000 b/d in 2006. The US company is establishing an ExxonMobil Technology Centre in Abu Dhabi to apply the industry’s most advanced technology to Upper Zakum in areas of reservoir management, well management and production operations. It will also provide support for training and personnel development.
Umm Shaif Oil Production
In late 2006 Abu Dhabi Marine Operating Company (ADMA-OPCO) signed the Engineering, Procurement & Construction (EPC) agreement for the Umm Shaif gas injection facilities (USGIF) project with Hyundai Heavy Industries (HHI) of South Korea. The project will enhance oil production with an average of additional 50,000 b/d by the beginning of 2010 from the offshore Umm Shaif Field, which was the first UAE oilfield to come into production. This target will be achieved through gas injection of approximately 600million standard cubic feet/day into Arab C and D reservoirs. The new oil separation facilities will handle the anticipated increase in gas/oil ratio (GOR) and produced water from reservoir fluids.
This is a major development project costing around US$1.6 billion and includes three new platforms and associated subsea pipelines along with cables, new bridges and tieins work at Umm Shaif Super Complex (USSC), in addition to major modifications of three existing gas wellhead towers in Umm Shaif Field. The Compression Platform (CP- 1), to be located north-east of USSC, is the heaviest with an estimated total weight of 16,000 tons. The topside alone weighs more than 13,000 tons. A bridge platform weighing more than 8000 tons will connect the accommodation and utilities platforms. The third platform, weighing more than 9000 tons, will be located 100 meters away from USSC and will accommodate oil separation facilities. It will be linked to a new water disposal well. The 23 kilometers of sub sea pipelines vary in size from 15 to 75 centimeters in diameter. Planned completion date is mid-2010.
Habshan to Fujairah
Pipeline Work has begun on a strategic project that will pump oil from Habshan, in Abu Dhabi, across the country to the bunkering port of Fujairah, thus by-passing the Straits of Hormuz. The Abu Dhabi based International Petroleum Investment Company awarded the engineering and design contract of the US$1 billion, 360-kilometre crude pipeline project to Worley Parsons in September 2007. The 48-inch pipeline will have a capacity to pump 1.5 million b/d. The project is due for completion by the second half of 2009. Germany's ILF Consulting Engineers was awarded a contract to manage the project.
Oil Refineries & their Products
Downstream development of refineries, petrochemical plants, and other related industries has created an integrated oil and gas sector. The UAE currently has five refineries with a combined capacity of more than 1.14 million b/d. The progressive buildup of refining capacity since the 1980s has made the UAE a sizeable net exporter of refined products; although their share in the total oil exports remains modest at about 10 per cent, it is on an upward trend. Furthermore, Abu Dhabi has been considering plans to further increase refinery capacity at Ruwais and also to build a new refinery at Fujairah. Four of the existing five UAE refineries are owned by the respective emirates; two are operated by Abu Dhabi Oil Refining Company (Takreer) and owned by ADNOC. Takreer’s refining capacity is now over 500,000 b/d, making it a major regional operator. Other refineries are in Dubai, Sharjah and Fujairah. Owned by Dubai Emirate, the Emirates National Oil Company condensate refinery (ENOC), which has a capacity of 120,000 b/d, began operations in Dubai in May 1999. The Fujairah and Sharjah refineries were not operating in 2006/07.
Petrol or gasoline prices are fixed by the UAE Government and are the same throughout the country. Gasoline of 95 and 98 octane is sold at fixed prices (Dh6.25 and Dh 6.75 a gallon in 2007), whilst all other domestically refined products such as diesel, jet oil, naphtha, bunkering oil, etc are sold at market rates. The 2007 price for diesel was Dh7.8 a gallon. Around 6 million tons of refined products per annum are sold domestically, while twice that quantity is exported.
In an effort to limit sulphur levels in the environment, the UAE Government issued directives to restrict sulphur in fuel to only 500 ppm from July 2007. In line with this policy, Emirates General Petroleum Corporation, Emarat, began marketing low sulphur gas oil (also known as diesel fuel or D-2 fuel) through its retail outlets. ADNOC and its subsidiaries have led the way in terms of environmental protection and ‘greener’ solutions to industrial projects. Part of this policy has been a constant striving for cleaner fuels. It was with this in mind that Takreer recently installed a new catalytic reformer plant with a capacity of 12,000 b/d and an isomerization plant with a capacity of 19,000 b/d, improving the quality of refined gasoline and increasing capacity. The new units reduce aromatics and benzene content enabling production of higher grade fuels. Sulphur levels have also been lowered further by introduction of a new gas oil hydrotreater of 15,000 b/d capacity and also revamping the existing 22,000 b/d gas oil hydrotreater by changing the catalyst. The ‘greener’ diesel complies with UAE legislation and with the latest international specifications that are due to come into force in 2010.
Reduce, Recover, Reuse
Takreer recently acquired the cooperation of Japanese companies to enhance flare gas recovery. Agreements were signed by Takreer with the Japan Cooperation Centre, Petroleum (JCCP) and the Toyo Engineering Corporation (TEC). The flare gas recovery project is expected to take 25 months at a total cost of over US$15 million. Implementation of the projects will reduce the emission of noxious pollutants, particularly combustion emissions such as nitrogen oxides (NOx), carbon monoxide (CO) and carbon dioxide (CO2). It also makes financial sense and is in line with the general trend of ‘Reduce, Recover and Reuse’, which is a catchphrase adopted by refineries worldwide.
The UAE is pumping billions of dollars into projects to boost its hydrocarbon production, establish more gas-related industries and increase oil extraction from its fields by gas injection. With its proven gas wealth exceeding 6 trillion cubic meters at the beginning of 2007, the UAE is the fifth largest gas power in the world and is one of the top LNG producers. Its sprawling LNG complex on Das Island produces in excess of 8 million tons per year. Increasing quantities of gas are being used to enhance oil recovery by injection into underground reservoirs. The two Abu Dhabi companies directly involved in natural gas industry are Abu Dhabi Gas Industries Company Ltd (GASCO), onshore, and Abu Dhabi Gas Liquefaction Company Ltd (ADGAS), offshore. GASCO was founded in 1978 to process the associated gas of Abu Dhabi's onshore gas and then pump it to-Ruwais Gas Liquefaction Plant where it is fractionated and exported. ADNOC utilizes part of the GASCO-produced gas locally.
In recent years several major projects have been completed by GASCO. These include Ruwais Digital Control System (2001), Asab Gas Development Phase I (2001, 2000), Ruwais Upgrading Project including Digital Control System(2001),Maqta-Jebel Ali Gas pipeline project (2002), Onshore Gas Development Phase II (2002), Bu Hasa Integrated Control System (2005), and Habshan Ethane Recovery Maximization (2005).
In 2007 GASCO had projects costing more than US$4 billion under development and scheduled for completion by the end of 2008. These are briefly discussed below.
The Onshore Gas Development Phase III (OGD-III) Project is designed to process 1306 million standard cubic feet per day (mmscf/d) of condensate rich gas (from the Thamama "F" reservoir) at Habshan and to produce 11,800 tons per day (t/d) of NGL (including 3400 t/d ethane) and 130,000 b/d condensate. Residue gas will be re-injected back into the reservoir for pressure maintenance purposes (gas cycling). EPC implementation of this OGD-III project is planned for completion by April 2008. The Ruwais third NGL Train is designed to process the additional 24,400 t/d of NGL produced from OGD-III, AGD-II (Asab Gas Development – Phase II) and other projects and to produce about 6400 t/d of raw ethane for transfer to the petrochemical plant at Ruwais (Borouge), 6000 t/d each of propane and butane and 5800 t/d of pentane plus products. The project essentially comprises a new NGL fractionation train and new storage tanks for propane, butane and pentane plus. EPC implementation is expected to take place by May 2008.
AGD-II is designed to recover 400 t/d of NGL from the sour condensate-rich gas from the existing Asab Gas Plant (AGP). Residue gas will be re-injected back into the reservoir for pressure maintenance purposes (gas recycling). Main facilities include two trains for gas treatment and two for NGL recovery together with a new NGL pipeline from Asab to Habshan and other required facilities. EPC implementation of the AGD-II Project is scheduled for completion by September 2008. The Habshan Gas Complex Expansion (HGCE) involves installation of enhanced gas processing facilities at Habshan to process additional associated gas produced by ADCO through their crude oil expansion projects at Bab and Bu Hasa and to introduce operational flexibility between Bu Hasa and Habshan. The project also includes installation of an acid gas enrichment unit (AGEU) for processing acid gas from OGD-III facilities as well as installation of two additional sulphur recovery units (SRU). EPC implementation of the project is due for completion by June 2008.
The Offshore Associated Gas Project (OAG) envisages transporting the excess offshore associated gas from Das Island through a 200- kilometer-long, 30-inch diameter offshore/onshore pipeline and to process it at Habshan. It will establish a strategic link between the offshore and onshore facilities. The project is being implemented through three separate EPC packages: one for the Das Island facilities, one for the offshore pipeline, and one for the Habshan facilities and onshore pipeline.
In addition to the above major developments, GASCO is preparing a master plan for the company and is involved with the Bu Hasa upgrade project, the Asab and Bab integrated control systems, the Bu Hasa–Habshan gas pipeline, gas supply to Al Ain Air College, replacement of NGL pipelines, a new lean gas station at Bu Hasa and development of non-process buildings at Habshan.
GASCO's fellow company involved with Abu Dhabi's gas resources ADGAS is the Gulf pioneer in the field of gas liquefaction. Its plant on Das Island is unique worldwide in its ability to process both associated gas, which is a by-product of oil extraction operations, and natural gas extracted as a free product from gas reservoirs. ADGAS Plant's feedgas, both associated and non-associated gas, comes from Abu Dhabi's offshore fields. The company's plant comprises three process trains with an average annual production of 8 million tons of liquefied natural gas, liquefied petroleum gas, pentane and liquid sulphur.
In early 2007 ADGAS awarded Technip a lump-sum turnkey contract worth approximately US$610 million for gas compression plants and associated facilities to be located at Das Island. The plant's facilities, which include compressor and booster stations, fuel gas treatment and gas dehydration units, will treat 211 mmscf/d of associated gases produced by offshore fields in Abu Dhabi.
Meanwhile, Abu Dhabi is using its abundant sour gas stocks to meet fast-growing domestic gas demand from power stations, homes and industries. With this in mind ADNOC planned a development of a major project estimated at over US$10 billion to tap into the sour gas resources at the Shah field. Announcement on the chosen partner is expected in May 2008. The project is expected to deliver a minimum of 500 cf/d of gas, with future development of another major sour gas reservoir, at Bab, also under long term consideration.
Dolphin Gas Project
Dolphin Energy's major strategic initiative involves the production and processing of natural gas from Qatar's North Field, and transportation of the dry gas by sub sea pipeline across joint UAE Qatari waters to the UAE. The project began full operations in 2007, with gas flowing through its pipeline from the Qatar gas field to the UAE. A development and production-sharing agreement was signed in 2001 between the UAE Offsets Group and the State of Qatar, under which, initially, up to 2 billion standard cubic feet of natural gas were to be supplied from Qatar to the UAE daily. Dolphin’s main customers are Abu Dhabi Water and Electricity Authority (ADWEA), the Federal Water and Electricity Company, the Oman Oil Company, and the Dubai Supply Authority. Dolphin’s main shareholder is the Abu Dhabi government, with 51 per cent ownership, and two foreign partners, Total and Occidental Petroleum, each with 24.5 per cent of the equity.
The company's first initiative, the Al Ain to Fujairah pipeline, came on-stream in January 2004. The pipeline supplies the Fujairah Water and Power Plant on the UAE's East Coast, initially with natural gas from Oman, and subsequently with Dolphin gas from Qatar. In May 2005, Dolphin began to supply natural gas to Ra's al-Khaimah. The gas is delivered via a tie-in near Qidfa between Dolphin's Al-Ain – Fujairah pipeline and the existing Emarat gas pipeline network. In early September 2007 the company signed a gas sales agreement with Oman Oil Company (OOC) to deliver an average 200 million standard cubic feet of gas per day (mmscf/d) to OOC from early 2008.
Dana Gas is the first regional private-sector natural gas company in the Middle East, established with over 300 founder shareholders from across the Gulf Cooperation Council (GCC) region, and some 425,000 investors from over 100 nationalities worldwide who submitted applications of over US$78 billion over ten days in the company's regional IPO in late 2005. Headquartered in Sharjah, the company is listed on the Abu Dhabi Stock Market (ADSM) and possesses a network of offices in Saudi Arabia, Egypt, the UK, and Canada, with further offices opening throughout the Middle East. Dana has assets and projects in gas exploration and production, processing, transportation and marketing in several countries, and aims to play a major role in the rapidly growing natural gas business throughout the Middle East–North Africa (MENA) region across the entire natural gas value-chain. It plans to expand its activities in all elements of the value-chain, including upstream exploration and production; through the midstream transmission and distribution of gas, including LNG trading; and downstream into gas-related industries and petrochemicals.
In addition to working on implementation of existing projects in the UAE, Dana Gas recently acquired Centurion Energy, a Canadian company with interests in Egypt, for US$950 million, marking its strategic entry into exploration and production and providing it with substantial oil reserves and further exploration potential of 26,300 square kilometers. It had immediate plans to drill 15 new wells in Egypt and announced its first successful oil strike at its Al Baraka-1 exploration well drilled in Komombo Concession in Upper Egypt in early September 2007.
The company also formed a new joint venture with Emarat to build, own and operate a 48-inch common-user gas pipeline with capacity of 1 billion cubic feet per day, to serve customers in the UAE. It also completed an acquisition to lead a consortium for development of the Gulf of Suez Gas Liquids Plant in partnership with the state-owned Egyptian Natural Gas Holding Company (EGAS) with processing capacity of 150 mmscf/d of natural gas and production of approximately 120,000 t/y of propane and butane in liquid form. The year also saw Dana Gas enter into strategic alliances with a number of companies from the region and internationally, including an alliance with Single Buoy Mooring (SBM) to develop a network of floating LNG receiving terminals, starting with a US$200 million project in Pakistan.
Established on 27 September 2005, and partly owned by the Ras al-Khaimah Government through RAKGAS, RAK Petroleum acquired in early 2007 the majority of the exploration and production assets of UAE-based Indago Petroleum. Another planned acquisition, of Gulf Keystone Petroleum, a firm with UAE links and with assets in Algeria, was not completed, following a failure to reach agreement with Algerian authorities. Shortly after the breakdown in GKP talks, RAK Petroleum announced that it had US$300 to US$800 million earmarked for acquisitions and was hunting for oil and gas assets in the Arab region and neighboring countries. One area of interest is believed to be East Africa.
Prior to being bought out by RAK Petroleum, Indago Petroleum entered into a joint petroleum concession agreement with the Ra’s al-Khaimah government over the offshore Saleh field and relinquished the Ra’s al-Khaimah onshore license. The Saleh concession area encompasses a field located 42 kilometers offshore and is a multi-well, multi-platform development that has been producing since 1984. After peaking at approximately 70 mmscf/d gas rate and 13,000 b/d condensate rate in 1986 the production has declined as a result of pressure depletion and encroaching water. Saleh production now currently averages approximately 100 b/d of condensate and small amounts of gas. The gas/condensate product is treated at the onshore processing plant in Ra’s al-Khaimah operated by RAKGAS, which also processes production from the Indago-operated Bukha field, where significant new gas and condensate reserves were discovered in early 2007.
Interest from both the government and the private sector in Abu Dhabi in sustainable energy has led to the establishment of Abu Dhabi Future Energy Company (ADFEC), which is investing several billion dollars in new projects in the next few years. The company is working with international partners on a range of projects, including ones to produce a clean bio-fuel; development and installation of photovoltaic systems in the region; carbon capture and storage (CCS) for enhanced oil recovery in Abu Dhabi, and other important environmental initiatives described elsewhere in this book.
ADFEC drives the MASDAR Initiative, a multi-billion dollar, multifaceted response to the need for a global focus on the development of advanced energies and sustainabilityrelated technologies. MASDAR Special Free Zone (SFZ) will promote synergy between academic resources, research facilities, industry, the financial community, entrepreneurs and family businesses.
The UAE sees renewable energy sources as complimentary to traditional hydrocarbons, given the rapid growth in overall world energy demand. To help meet this demand, Abu Dhabi is leveraging its substantial resources and expertise in the world's energy markets to develop the technologies of the future.
Supported by partners that include many major energy and technology bodies such as BP, Shell, Occidental Petroleum, Total, Mitsubishi, Mitsui, GE, and Rolls-Royce, the MASDAR Initiative will focus on the development and commercialization of advanced innovative technologies in renewable energy, energy efficiency, carbon management and monetization, efficient water usage and desalination.
The new entity will operate in close cooperation with ADNOC, ADWEA, the Environmental Agency–Abu Dhabi (EAD), the Abu Dhabi Education Council and other relevant government departments. The project is expected to start by 2009 and begin to show results by 2015.