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Tue 30 Mar 2010 08:54 PM

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ADNOC and Conoco gas joint venture eyes 2014 start

Project is a strategic part of the UAE's plans to meet rapidly expanding demand.

The UAE's $10 billion Shah gas project will start up by the second or third quarter of 2014, even though US oil major ConocoPhillips has yet to make a final investment decision on it.

The chief executive of the joint venture of Abu Dhabi National Oil Co (ADNOC) and Conoco is cautiously optimistic about the US company's commitment to the project.

Speaking to reporters on the sidelines of an industry event, Saif Ahmed al Ghafli said: "Once they (ADNOC and Conoco) both agreed to launch the first package, that was good news, now how will it end up we will wait and see."

Conoco, the third largest US oil company, has recently embarked on a two year plan to divest some assets and reduce refining capacity to boost returns and reduce debt as it plays catch up with its oil major peers.

ADNOC holds a 60 percent stake in Shah, while Conoco holds the remainder.

The project, which is a strategic part of the UAE's plans to meet rapidly expanding demand from power plants and industry, has already been delayed by at least three years.

In February ADNOC's head of the gas processing division Ismail al Ramahi said first production from the joint venture with Conoco was expected by late 2013 or early 2014.

The project, which will be implemented in three phases, will process about 1 billion cubic feet per day of sour gas from 20 wells.

To hit its start up target, the joint venture group will have to launch and award the main Engineering, Procurement and Construction (EPC) contracts by the summer, Ghafli said.

He said: "Well we will have to do it very soon...this summer."

The Shah gas development is the first in the UAE of a sour gas field. The gas from this project has a content of around 30 percent of deadly sulphur dioxide, making it tougher to produce than conventional gas.

The joint venture is still evaluating the option of transporting the sulphur produced from the project to storage via rail versus the original plan of pumping it through a pipeline, Ghafli said.

He added: "Well we are moving forward to make a decision very soon...the prospects are attractive (to the railway plan)."

The UAE, which has the world's fifth-largest gas reserves, plans to start building a 1,200 km (745 miles) rail network worth up to $8.2 billion by the end of 2010 to improve logistics and the environment. (Reuters)

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