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Wed 1 Nov 2006 12:00 AM

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Gas rises in Abu Dhabi

Changing attitudes and higher prices mean that Abu Dhabi is ready to more fully exploit its sour gas reserves

The gas business is set to take off in Abu Dhabi. According to officials in the Emirate, natural gas production will rise to 6 million cubic feet per day (million cfd) by 2008, from 4.5 million cfd now, a jump of 33%.

Also over the next two years or so, liquid petroleum gas (LPG) output will surge to 13 million tonnes per year (million tpy), up from 7 million tpy, an increase of 86%.

Yousuf Omair Bin Yousuf, secretary general of the Supreme Council for Oil and chief executive of Abu Dhabi National Oil Company (Adnoc) says that with plentiful natural gas reserves on hand (currently estimated at around 200 trillion cubic feet) the key driver for this increase in production will be rocketing domestic demand.

He estimates that domestic demand for gas is growing at around 10% per annum, compared with an average world rate of around 6-7%; world oil demand, meanwhile, is growing at a fairly pedestrian 2% per annum.

On these current trends Abu Dhabi is set to become one of the world’s largest gas producers. The Emirate is already rated number five in the world by size of gas reserves.

The gas has always been there – so why should there be such a sharp acceleration in use over the next few years? The answer lies in a change of approach.

Much of Abu Dhabi’s reserves are sour gas, with a high content of hydrogen sulphide, which were until recently considered not commercially viable. High hydrocarbons prices over the last few years, as well as growing demand for gas, and a shift in attitudes to favour what is seen as an environmentally cleaner fuel, have changed the picture.

New fields under development both onshore and offshore will provide additional gas, and the current thinking is that it will be economically viable to strip it for LPG and other products, and then inject the remainder to increase reservoir pressure at the country’s oil fields.

Shell and Exxon Mobil are also involved in exploration for sour gas at Shah and Bu Hasa, and the state-owned Adnoc is expected to invite tenders for production next year.

Other companies that have expressed interest include BP, Chevron, Total, Eni, Occidental, Lukoil, Sinopec, and India’s ONGC.

“We plan to tap that gas and export it.

We are communicating with various companies who have expressed interest. It will be a fair, open selection process.

We are moving fast on this,” Bin Yousuf said, although he did not give precise dates.

The Adnoc chief acknowledged that there are a series of technical issues to be overcome in the exploitation of sour gas.

“Dealing with sour gas is one of our big challenges.

It is difficult and dangerous as far as safety is concerned, and we should have the technology to produce continuously,” he said.

Private sector analysts suggest that Abu Dhabi’s proven oil reserves are likely to stay flat or even shrink a little, as production rises somewhere above the current 2.9-3.0 million barrels per day.

Natural gas output, on the other hand, could surge to 70 billion cubic metres (bcm) by 2010, ahead of domestic consumption of 57 bcm, leaving an exportable surplus of 13 bcm, which could, depending on prices, generate additional export earnings of US $2.4 billion per annum.

A separate component of Abu Dhabi’s gas programme, the ambitious US $3.5 billion Dolphin project to pipe natural gas in from Qatar, now appears to have emerged from a period of uncertainty.

Back in July, Saudi Arabia was reported to have asked Occidental of the US and Total of France, two of the partners in the project, as well as banks funding the scheme, to stop work because a section of the pipeline ran through disputed territory.

In effect, the proposed route for the pipeline runs through Gulf waters close to a section of Saudi territory that borders both the UAE and Qatar.

If there was a problem, however, it now seems to have been resolved.

The Adnoc chief said in September, soon after a high level meeting of the two governments, that the project was continuing normally.

The Dolphin pipeline will have the capacity to pump 3.2 billion cubic feet/day.

It is 51% owned by Mubdala Development Company, an arm of the Abu Dhabi government, with Occidental and Total each holding 24.5%.

Starting next year (a little later than the original target of late 2006), it will initially carry around 2 billion cfd of natural gas and condensates from Qatar’s North Field to Abu Dhabi.

Dolphin is important because of Abu Dhabi’s galloping energy demand. Qatar’s proven natural gas reserves stand at 500 trillion cubic feet, two-and-a-half times Abu Dhabi’s.

The project will involve processing wellhead gas at Ras Laffan, stripping out condensate, ethane, LPG, and sulphur, and then pumping the remaining sweet gas on to Abu Dhabi, Dubai, the northern emirates and Oman.

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