• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 9 days The United States produced more crude oil than any nation, at any time.
  • 1 day Could Someone Give Me Insights on the Future of Renewable Energy?
  • 13 hours How Far Have We Really Gotten With Alternative Energy
  • 9 hours Bankruptcy in the Industry
Uzbekistan's Natural Gas Crunch Squeezes State Coffers

Uzbekistan's Natural Gas Crunch Squeezes State Coffers

Uzbekistan, once a gas exporter,…

Europe Still Addicted To Russian LNG

Europe Still Addicted To Russian LNG

The fact that neither pipeline…

Argentina Taps Waste Gas To Mine Bitcoin

Argentina Taps Waste Gas To Mine Bitcoin

Crypto companies are tapping into…

Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

More Info

Premium Content

UAE’s ADNOC Awards Huge Contracts To Boost Gas Output At Critical Time

  • ADNOC awarded $2 billion worth of drilling contracts for Hail and Ghasha sour gas projects.
  • The UAE is looking to achieve self-sufficiency in natural gas production.
  • The contracts are part of a broader plan to boost the country's industrial sector.
  • ADNOC awarded the US$2 billion of contracts to its affiliate, ADNOC Drilling.

The UAE’s state-owned Abu Dhabi National Oil Co. (ADNOC) has awarded $2 billion worth of drilling contracts to spur the development of the Hail and Ghasha sour gas project as part of its plans to help OPEC’s third-biggest producer achieve gas self-sufficiency, and after that to look to exporting the surplus. Becoming self-sufficient in gas part of its broader ‘Operation 300 Billion’ plan that intends to raise the contribution of the country’s industrial sector to AED300 billion (US$81 billion) from the current AED133 billion within the next 10 years. This objective – itself part of the UAE’s Circular Economy Policy 2021-2031 - will be achieved in large part through the creation of 13,500 industrial companies over that period, covering the manufacturing, construction, electricity, gas, mining and quarrying sectors in the first instance. Self-sufficiency in gas will also allow the UAE to build out a strategic petrochemicals sector and to avoid being reliant on Qatar for the gas that it requires for its electricity grid.  In keeping with this idea of self-sufficiency, ADNOC awarded the US$2 billion of contracts to its affiliate, ADNOC Drilling, in which it has a stake. A significant part of the work will be focused on the development of the Ghasha concession, the world’s largest offshore sour gas development, production from which is expected to begin in 2025, with the target being the production of at least 1.5 billion cubic feet per day (bcf/d) of gas by 2030. This vast concession comprises not just the Ghasha field itself but also the Hail, Hair Dalma, Satah, Bu Haseer, Nasr, SARB, Shuwaihat, and Mubarraz fields as well. ADNOC’s partners in the overall concession are Italy’s Eni (25 percent stake), Germany’s Wintershall Dea (10 percent), Austria’s OMV (5 percent), and Russia’s Lukoil (5 percent). “ADNOC is committed to unlocking the UAE’s abundant natural gas reserves to enable domestic gas self-sufficiency, industrial growth and diversification, as well as to meet growing global gas demand,” said ADNOC’s chief executive officer, Sultan al-Jaber, in Abu Dhabi last week. 

Related: What Policymakers Must Learn From Today’s Energy Crisis

This drive towards self-sufficiency in the gas sector was energised after the huge shallow gas field discovery made in 2020 in Jebel Ali, which, according to statements from the companies developing the site – ADNOC, and the Dubai Supply Authority - holds around 80 trillion cubic feet of gas across a 5,000 square kilometre area between Abu Dhabi and Dubai. Following this, the hunt for further sizeable gas deposits picked up pace, and not just in the vicinity of the previous discoveries. Another of the UAE’s constituent emirates, Sharjah, also recently announced proposals to launch an offshore bidding round for its new gas and condensate find.  The bidding, which is officially mooted to start in early 2023 but which may occur later this year, according to legal sources in Abu Dhabi spoken to by OilPrice.com last week, relates to Sharjah’s Block B, run jointly by Eni and the state-owned Sharjah National Oil Corp (SNOC). Late in 2020, the two companies discovered the Mahani reservoir, and subsequent first drilling yielded up to 1.4 million cubic metres per day (mcm/d) of lean gas and associated condensate. First gas was also produced this year from the Mahani-1 gas well, but no volume data was released by the companies, although SNOC did state that it is continuing to limit production from Mahani-1 at less than 1.4 mcm/d to collect data and map out the full potential of the reservoir. Further drilling by the two companies, which also work together in onshore concession areas A and C, is set to continue with two new wells, according to the statement by SNOC, and the company added recently that the initial seismic data on the developments show ‘significant’ reserves that will be ‘very economical’ to produce and develop.

Just prior to last week’s contract awards for gas development, ADNOC signed a partnership agreement with France’s TotalEnergies that includes cooperation in trading, product supply and carbon capture, utilisation and storage. This in line with, on the one hand, the UAE’s target of increasing its crude oil production to 5 million barrels per day (bpd), from around 4 million bpd currently, again by 2030, and, on the other hand with France’s policy of attempting to reduce its own dependence on Russian energy imports. As highlighted and analysed by OilPrice.com recently, TotalEnergies is at the vanguard of this policy, certainly in the Middle East, and the company stated about the partnership deal that: “[The agreement includes] the development of oil and gas projects in the UAE to ensure sustainable energy supply to the markets and contribute to global energy security.” 

This comment came after the signing of the UAE-France Comprehensive Strategic Energy Partnership, which also focuses on securing energy supply for France going forward. Such concerns about the negative effects for France resulting from the staggered bans on Russian energy ahead were echoed again earlier in July  by France’s economy minister, Bruno Le Maire, who said: “Let’s prepare for a total cut-off of Russian gas; today that is the most likely option.” Although France receives slightly less than 20 percent of its gas imports from Russia – much less than several other European Union (EU) states – its liquefied natural gas (LNG) imports fell by nearly 60 percent month-on-month (m-o-m) in June, to around 1.06 million metric tonnes, according to industry data. 

Related: How China Could Send LNG Prices Into The Stratosphere

In addition to the new elements delineated in the partnership agreement, TotalEnergies has, in the gas sector alone: a 40 percent stake in the Ruwais Diyab unconventional gas concession, the output target of which is 1 bcf/d by 2030, and which saw first production in 2020; a 15 percent stake in ADNOC Gas Processing, which produces natural gas liquids and condensate from the associated gas produced by ADNOC Onshore; and a 5 percent stake in ADNOC LNG (liquefied natural gas). In the oil sector, TotalEnergies also has an abundance of interests in UAE projects, including: a 20 percent stake in the Umm Shaif/Nasr oil field; a 5 percent stake in Lower Zakum; and a 10 stake in the ADNOC Onshore concession, which pumps almost half of ADNOC’s oil production.

The UAE, as with many countries in the perennially fractious and fluid geopolitical situation of the Middle East, plays a delicate diplomatic balancing act not just between East and West but also between its own leadership and the desires of its people, so soon – in historical terms - after the Arab Spring revolutions of the early 2010s. Despite many leaders in the Middle East citing the 2009 Cairo speech of then-U.S. President, Barack Obama, as being a spark – even ‘the’ spark – that ignited the widespread and bloody protests across the region, with its talk of a ‘new beginning’ for U.S. foreign policy in the Middle East, the UAE nonetheless was an early participant in the U.S.-led relationship normalisation deals program between Israel and various Middle East and North African states. The U.S. regarded this program as not only likely to provide it with more control over oil and gas coming from the region (and potentially to allow it to break entirely clear of its relationship with Saudi Arabia) but also to allow it to re-establish more of an on-the-ground presence in various countries that were turning away from U.S. influence at the time. A combination of factors, including the removal from office of the policy team that pushed it under the sponsorship of former President, Donald Trump, has seen the momentum of this plan slow to a halt. 

By Simon Watkins for Oilprice.com


More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News