ADCO awards gas contracts

Abu Dhabi Company for Onshore Oil Operations (ADCO) has awarded Dh3 billion (US$818 million) of contracts for a project to extract an extra 2.5 trillion cubic feet of gas from some of its long-standing oil and gas developments. It plans to award a further $2bn worth of contracts this year to help raise its capacity to pump crude from three oilfields. The Bab Gas Compression Project in Abu Dhabi is showing how advanced technology to improve recovery from mature oil and gas fields can be as effective in unlocking reserves as making new discoveries. The volume of extra gas that ADCO will produce between 2012 and 2030 is bigger than the reserves of the largest gasfields found in the North Sea in recent years. "This project is of a strategic nature because it adds to the security of gas supplies to the UAE," said Abdul Munim al Kindy, the general manager of ADCO. "This is gas that would not be recovered otherwise." ADCO, which is a unit of the Abu Dhabi National Oil Company (ADNOC), is primarily responsible for onshore oil production in Abu Dhabi, but also produces gas from its oilfields and some gasfields in the emirate. The company reinjects much of its 5.3 billion cubic feet a day of gas production into mature oilfields, in order to squeeze out more oil. ADCO said the extra gas from the Bab reservoirs would be sent to an ADNOC processing plant at Habshan, the site of Abu Dhabi's biggest onshore oilfields. The UAE has the world's 10th biggest gas reserves but like most Gulf oil producers it is short of gas supplies for power plants, industrial developments and its oil sector. The country imports about a third of the gas it uses from Qatar. ADCO yesterday awarded an engineering, procurement and construction contract to South Korea Engineering and Construction, and a related contract for supplying gas compressors to a German maker, Man Turbo. The gas compression work is the Korean firm's first in Abu Dhabi. ADCO re-tendered the project last year after the lowest bid it received was for $1.5bn, Mr al Kindy said. While the gas project will help ADCO extend the life of its oilfields, the company is also seeking to raise its capacity to pump crude by nearly 30 per cent over the next seven years to 1.8 million barrels per day (bpd), from 1.4m bpd now. Mr al Kindy said work on another three oilfields, for which $3.5bn of contracts were awarded this year, would boost ADCO's production capacity by 200,000 bpd in three to four years' time, or by half the total increase sought. A drop of about 50 per cent in construction costs in recent months as the global recession has cut demand for most commodities has made ADCO's capacity target more affordable. "Definitely, the (falling) cost of construction has had a positive impact," Mr al Kindy said. "Bids have become cheap, resulting in big savings for us." So far this year, ADCO's savings from re-tendering projects it considered too expensive have exceeded $1.6bn. The company, which is 40 per cent owned by foreign firms and pumps about half of ADNOC's total crude output, has stressed its commitment to costly capacity expansions, despite the global recession, falling oil demand and concerns about the looming expiry of its foreign partners' concessions. tcarlisle@thenational.ae