Abu Dhabi could develop significant LNG export capacity by 2024

The Supreme Petroleum Council announced the discovery of 15 trillion cubic feet of gas, which could transform the UAE to a net gas exporter

The LNG arm, based offshore on Das Island, has been operational since 1977. Courtesy Adnoc

Abu Dhabi can expect to develop significant liquefied natural gas export capacity by 2024, on the back of the latest discoveries of oil and gas reserves, according to consultancy Wood Mackenzie.

“To export LNG at capacity (around 5.6/5.8 million metric tonnes per annum) requires a little over 1 billion cubic feet per day to be sent to the liquefaction plants,” said Tom Quinn, senior research analyst for Middle East at Wood Mackenzie.

This additional production, however, would require refurbishment of existing facilities.

“We expect the plant could export at capacity from 2024 onwards, depending on Abu Dhabi’s priorities for the gas,” he said.

The UAE, which accounts for 4.2 per cent of global production of crude and 3.1 per cent of proven reserves of natural gas, announced it had found 15 trillion cubic feet of gas in existing and untapped blocks. The new finds would mark a 7.1 per cent addition to existing reserves of gas, which stood at around 209.7 trillion cubic feet at the end of 2017, according to the latest BP Statistical Review of World Energy.

Recovery rates for the potential new finds, which include a billion barrels of oil in place, could be as much as 25 per cent or higher if they are largely conventional crude.

"UAE reports reserves of 97.8 billion barrels of crude to Opec. The announcement stated a discovery of 1 billion barrels in place, so assuming recovery rates of 25 per cent (could be higher) it comes out at 250 million barrels of reserves,” said Mr Quinn.

_____________

Read more:

_____________

On the back of the discoveries, the UAE would be able to implement a gas strategy that could sustain LNG production to 2040 and allow Adnoc to develop “incremental LNG and gas-to-chemicals growth opportunities,” the company said on Sunday.

However, other analysts such as Siamak Adibi, senior consultant at London-based Facts Global Energy, say that development of significant LNG capabilities may take more time.

“This may be one of the more substantial gas discoveries in recent years [for Adnoc],” he said.

“[However], 2024 may be a bit optimistic, I think expansion could take 2025 or more,” he added.

The country's state-backed Abu Dhabi National Oil Company, which owns and operates most of the oil-producing fields in the UAE, is currently in the middle of a licensing round, in which six blocks are on offer, with contracts expected to be signed in the first quarter of 2019.

“The important part of the announcement is that these discoveries justify further exploration - relevant to the licensing process currently underway,” said Mr Quinn.

Adnoc, which had begun the year with a significant pivot towards leveraging its downstream sector, with as much as $45 billion to spent in developing its refining and chemical capabilities with partners over the next five years, is also spending big on its upstream assets, notably gas.

The UAE is reliant on imports, mainly via pipeline from Qatar to meet its gas deficiency and growing demand for the cleaner fuel to generate electricity and power industry. Unlocking its gas caps, much of which is sour - having a high sulphur content - is an important feature of the latest capex of Dh486bn approved by Abu Dhabi's Supreme Petroleum Council.

The discoveries are significant, noted Energy Aspects' analyst Richard Mallinson, as much it "seemingly comes from gas caps at existing oilfields that were previously thought to contain too much sulphur to be commercially developed."

While Ehsan Khoman, Mena research head at Japan’s MUFG Bank, observed that the significant increase to oil production capacity would warrant Adnoc’s “capability to respond to adjustments in the global demand-supply ‎oil balance as and when necessary over the long-term.”

The UAE is Opec's fourth-largest producer and in September pumped 3 million barrels per day of oil.