ADNOC awards $402m gas contract

The Integrated Gas Development (IDG), will transfer up to 1 billion cubic feet of gas per day from offshore fields to ADNOC's onshore operations.

The Abu Dhabi National Oil Company (ADNOC) has awarded a US$402 million (Dh1.27 billion) contract to build part of the emirate's centrepiece natural gas development, the company said Tuesday. The Integrated Gas Development (IGD) will transfer up to 1 billion cubic feet of gas a day from offshore fields to ADNOC's onshore operations, where it is needed as fuel for power stations and for injection into oil reservoirs to boost output. The engineering, procurement and fabrication contract was awarded to the National Petroleum Construction Company (NPCC), which is majority owned by the Government's General Holding Corporation. NPCC will help the Abu Dhabi Marine Operating Company (ADMA-OPCO), a subsidiary of ADNOC, boost the supply of gas to the project. "IGD is an ambitious and strategic initiative of ADNOC to process and supply the gas to meet the growing needs and development plans of Abu Dhabi," ADMA-OPCO said in a statement. The IGD, which has an estimated cost of $6bn and is scheduled to be completed by 2013 or 2014, cannot come online quickly enough for Abu Dhabi as it confronts a looming shortage of natural gas. The project is likely to have more output than the Shah sour gas development with ConocoPhillips, which has received much more publicity. The contract is the latest in a string of big investments announced by ADNOC and its subsidiaries this year, while other oil companies have been saying they would delay expansions because of low oil prices and poor access to credit. Oilfield development costs have fallen steeply in the past six months as a result of falling prices for steel and contractors, and Ali al Jarwan, the general manager of ADMA-OPCO, said that ADNOC would "utilise the best prevailing market conditions as a golden opportunity for investment". An index of global costs in the industry compiled by Cambridge Energy Research Associates fell 8.5 per cent in the past six months, while ADNOC executives have claimed cost savings of 20 to 50 per cent on recent contracts. The IGD marks an important change in ADNOC's strategic plans, which for decades have steered offshore gas to the Abu Dhabi Liquefaction Company (ADGAS) for conversion into liquefied natural gas and export via tanker. Those plans have changed as a result of rapid growth in gas demand that has outstripped onshore gas output, and ADGAS is now expected to shelve plans to expand its capacity. The NPCC will build a gas processing platform and pipeline at the Umm Shaif field. The gas will be piped 38km to Das Island for initial processing, then transported to onshore plants in Ruwais and Habshan. ADMA-OPCO said the work would be completed by mid-2012. It is starting up just as the company is completing a separate $1.6bn project at Umm Shaif to construct three platforms to reinject gas into the oil reservoir. The NPCC's contract, which was announced yesterday but awarded at the beginning of April, is the only one that ADMA-OPCO will award for its part of the IGD project, a company spokesman said. ADGAS and Abu Dhabi Gas Industries (GASCO) have not yet announced the results of bids for their portions of the project. The processing facilities on Das Island will be built by ADGAS, while GASCO is responsible for a condensate plant at Ruwais, and a big gas plant at Habshan. [e-mail]