ADNOC can benefit from lower building costs

ABU DHABI NATIONAL Oil Company (ADNOC) expects to save 30 per cent on the cost of developing its major oil and gas projects because of lower construction costs. In the keynote address at the Energy Exchange’s Gas Arabia conference in Abu Dhabi recently, Ismail al Ramahi, the manager of ADNOC’s gas process division, said the company would press ahead with energy development during the global economic downturn, but at much lower cost than it previously expected.“

ADNOC is committed to continue with its major projects, taking advantage of this situation so we can complete these project at reasonable cost,” he said. “Project costs will be at least 30 per cent cheaper than what we had estimated before.”Over the next two years, the company will award contracts worth tens of billions of dirhams, with some deals expected this year, Mr al Ramahi said .Among the pending deals, ADNOC expects to award the main engineering, procurement and construction contracts for the Shah sour gas development “this year and next year”, he said, following a bidding process to start “very soon”.

According to Mr Ramahi, frontend design and engineering work on the project is nearly complete. The Shah gas project, which industry sources had estimated would cost about US$10 billion (Dh36.73 billion), is one of the main developments through which ADNOC hopes to boost the supply of gas available to fuel Abu Dhabi’s power plants and industries. Under an agreement announced last year, it is developing the deeply buried gas deposit, which contains high concentrations of toxic hydrogen sulphide, in partnership with the US energy company, ConocoPhillips.Other projects in ADNOC’s gas pipeline include the socalled “Integrated Gas Development”, which will link Abu Dhabi’s offshore and onshore gas operations. The front-end design and engineering contract for the project would be awarded “very soon”, Mr Ramahi said, with work on the project slated to begin later this year.

“A lot of tenders will be issued very soon in Abu Dhabi in the oil and gas sector,” he added. “The gas sector will be one of the main areas where we see economic development during this challenging time.”ADNOC is also pursuing a project to produce nitrogen for injection into gas fields, he said, the first time the inert gas would be used for enhanced recovery in a gas reservoir. The project, which is expected to produce between 300 million and 600mn cubic feet per day of nitrogen, could be expanded if it is successful.

Elsewhere in the world nitrogen injection has been used successfully to boost production from ageing oilfields, most notably in Mexico’s biggest oil reservoir. Another ADNOC gas project, still at an early stage of development with Masdar, BP and Rio Tinto as partners, involves the production of hydrogen as a fuel for electricity generation and the capture of carbon dioxide emissions from the hydrogen plant for injection into oil fields.

ADNOC is also implementing a project to supply compressed natural gas as a fuel for vehicles in Abu Dhabi, with the aim of reducing carbon emissions and local air pollution, and is taking steps to recover gas produced from oilfields that it previously burnt.“We are fully committed to gas as a most important and clean fuel,” Mr Ramahi said. ADNOC also plans to increase its investment in oil and gas-related research and development. It will soon announce a partnership with several major international oil companies to set up a research institute in Abu Dhabi, he said.

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