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Tue 1 May 2007 12:00 AM

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Sour gas project has the oil majors locking horns over

Sour gas project offers opportunity for foreign companies to invest in UAE’s oil industry.

Major international energy companies BP and Royal Dutch Shell are among the competitors fighting it out for a sizeable slice of a giant sour gas development project in the United Arab Emirates.

Abu Dhabi National Oil Company (ADNOC) has invited bids from several other companies as well, including BG Group and Japan Oil Development Company. Some industry sources report France's Total and US Occidental Petroleum Corporation have also submitted bids. Notably, Occidental was announced as a sponsor of May's Sour Oil Gas Advanced Technology (SOGAT) annual conference and workshops around the time the news broke. The winning bidder will hold a 40% share in the project, with ADNOC retaining a majority interest in the development.

The project, which is one of the largest open to oil and gas companies competing for limited access to the Middle East's commercial energy potential, is said to be worth in the region of US $10 billion. When complete, gas production is expected to be as high as three billion cubic feet (cf) per day.

"This is the largest gas development in the region in terms of gross production," said Colin Lothian, Middle East senior analyst for consultant Wood Mackenzie.

"It is also one of the biggest projects available for participation of international companies. The successful bidder will look forward to a long-term role in the future of Abu Dhabi's gas development."

The project requires installation of four sulphur processing units to treat the gas. Abu Dhabi Gas Industries (GASCO) will invest US $11 billion in gas projects by 2012 to boost output. This will help Abu Dhabi increase its natural gas output to 7.2 billion cf per day by 2009, a 36% increase on current production. The UAE is the world's sixth largest oil exporter and holds the world's fifth largest gas reserves at over 200 trillion cf.

The increased production may be used to help feed the UAE's growing hunger for natural gas. Like the rest of the region, economic expansion is being followed by rising energy needs. According to the US Energy Information Administration, natural gas use in the Middle East is expected to more than double between 2003 and 2030. In part this is being driven by oil-exporting countries deliberately expanding domestic natural gas use, to make more oil available for export. Figures from the GCC indicate gas consumption in 2005 was 343 billion m3. This is expected to reach 533 billion m3 by 2010.

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