State-owned Abu Dhabi National Oil Company awarded an onshore block to Occidental Petroleum for a participating fee of Dh893 million ($244m).
The US firm will hold a 100 per cent stake in the Onshore Block 3 in the exploration phase as part of its 35-year concession agreement.
The block, which is adjacent to the ultra sour Shah gas field developed and operated by Occidental, could hold as much as 3.5 billion barrels of oil and up to a trillion cubic feet (tcf) of gas, Vicki Hollub, chief executive at Occidental Petroleum told The National in an interview.
"One thing that we’re excited about this Block Three in Abu Dhabi is that it’s one and half million acres, so it’s really huge. And in addition it has stack play,” said Ms Hollub.
Stack play refers to formations that have more than one reservoir atop each other.
"We believe that there’s potentially 3.5 billion barrels in place. We expect that it has a tcf of gas, so we have both the ability to [find] oil and the ability to find gas in this block,” she added.
Potential gas discoveries from the block are likely to be sour, with possible synergies for refining with the adjacent Adnoc Sour Gas facilities. "Sour gas" typically contains high levels of sulphur, which has to be separated for cleaner gas to be extracted. Abu Dhabi has high levels of such sour gas formations, which require technical expertise to refine.
Occidental Petroleum was awarded 30-year rights to develop the $10 billion Shah gasfield in Abu Dhabi’s western desert in 2011. The ultra sour gas development in which the Houston-based firm holds 40 per cent participating interest produces a billion cubic feet (bcf) per day of gas and became operational in 2015.
The facilities previously known as Al Hosn Gas produce 1 bcf of gas per day as well as refine 3.5 million tonnes of sulphur annually from the fuel.
Ms Hollub said that plans were underway to expand capacity through “very minimal additional capital investment”.
"So now we have the capacity up to 1.3 bcf a day. Ultimately, we’re going to look at how the reservoir performs and what additional gas we may be able to get into that plant, but I believe over time we’d be able to expand that capacity even more,” she added.
The award to Occidental follows earlier awards of offshore concessions to a consortium of Italian energy firm ENI and Thailand’s PTT Exploration and Production Public Company in January.
“Occidental was selected after a competitive bid round in which they presented a compelling plan for exploration of the area,” said Dr Sultan Al Jaber, Adnoc Group chief executive and UAE State Minister.
“Occidental is already Adnoc’s joint venture partner in Shah onshore gas production and processing and the award reflects our strategy to develop long-term partnerships with those who want to invest with us across our value chain,” he added.
Development of sour gas resources is critical to Abu Dhabi, which last year announced discovery of deposits equivalent to a 1 per cent increase to existing oil reserves and a 7.1 per cent addition to proven gas reserves.
Adnoc awarded in November a 40 per cent stake in the Ruwais Diyab unconventional gas concession to French energy major Total. Germany’s Wintershall was also awarded a 10 per cent stake last year in the Ghasha ultra sour gas concession as Abu Dhabi looks to leverage previously uneconomical gas resources in its ambitions to become a net gas exporter.