ADNOC to lift curb on oil output

Government-owned producer set to follow other OPEC countries and increase production.

Abu Dhabi National Oil Company (ADNOC) is preparing to pump more crude after curbing output for more than a year to comply with OPEC cuts. "This year we all know there will be an increase in production," said Asim al Zarouni, the drilling manager of the Abu Dhabi Government-owned oil company.

"It is no secret that the big OPEC countries are increasing their production," he told reporters on the sidelines of the annual DrillTech conference in Abu Dhabi, which ends today. His comments came just nine days before OPEC ministers are due to meet in Vienna. To prepare for higher production levels, ADNOC will expand its drilling activities this year, employing 34 or 35 rigs instead of the 30 rigs it has used for the past two years.

Despite a big drop in global oil demand last year as the recession bit, ADNOC did not idle any of its rigs. "We don't release rigs. We actually are under-supplied with rigs. We need more," Mr al Zarouni said. ADNOC obtains most of the rigs it uses from its wholly owned oilfield services unit National Drilling Company, but also leases rigs from other contractors. Mr al Zarouni said ADNOC planned to boost its oil production capacity by about 30 per cent "in stages", which is consistent with the company's previously stated goal of raising capacity to 3.5 million barrels per day (bpd) by 2019.

ADNOC's crude accounts for more than 95 per cent of total UAE oil production, which approached 3 million bpd before OPEC announced record cuts to its target output in late 2008. The oil exporters' organisation, which controls 40 per cent of global oil supplies, cut production in response to crude's steep slide from the record $147 per barrel reached in July of that year. Most of ADNOC's drilling will be directed towards managing its existing oil reservoirs and optimising their output. The company continues to drill appraisal wells, however, to refine its estimates of oil and gas reserves. It also explores for deposits that may have been overlooked. "Maybe we have discovered all the giants, but there are still small fields to be discovered," Mr al Zarouni said.

"Sometimes we have discoveries in the same fields where we produce oil, because some of those fields are very complex and have many [geological] horizons." About 75 per cent of ADNOC's drilling activity is currently related to oil, and 25 per cent to gas, he added. The oil output capacity of the UAE and other OPEC countries could continue rising for decades. "We are still very far from the peak," he said.

Nevertheless, maintaining or increasing production through the development of new fields, or by applying more advanced technology to existing reservoirs to squeeze out more oil, is likely to require more drilling than in the past. That is because oil producers are now starting to develop so-called "non-conventional deposits" that are challenging to exploit economically, as well as tapping deeper reserves.

They are also turning to complex computerised reservoir models to help optimise output, creating a greater need for service wells to adjust oil flows, correct problems with producing wells and collect data. "Drilling activities will increase significantly in the next decade to sustain production and increase reserves," Mr al Zarouni told the DrillTech conference. The total number of metres drilled in oil-related activities in the next decade could exceed the corresponding total for the past 50 years, he predicted.

OPEC ministers are scheduled to meet on Wednesday of next week to decide whether to revise the group's output target, which has remained unchanged since the end of 2008. Most officials of the organisation speaking ahead of the meeting have suggested a change is unlikely. Although the world remains oversupplied with oil, as major industrialised economies struggle to emerge from recession, crude prices have more than doubled in the past year.

In New York yesterday, crude rose to a two-month high above $82 per barrel on improving economic sentiment.