Foreign oil majors’ capabilities ‘needed for Abu Dhabi’s ouput target’

Abu Dhabi National Oil Company (Adnoc) is evaluating companies’ plans for producing 70 per cent of the oil contained in Abu Dhabi's oilfields, twice the global average. Pawan Singh / The National

Abu Dhabi’s 70 per cent recovery rate for its onshore oil and gasfields will require the capabilities provided by the majors whose production rights are expiring, say industry executives.

In the auction for the rights to oilfields that account for half of the emirate’s production, Abu Dhabi National Oil Company (Adnoc) is evaluating companies’ plans for producing 70 per cent of the oil contained in the fields, twice the global average.

The highest average for an oil company today is Statoil’s 50 per cent, according to the Norwegian state producer. It made waves last year when it pushed its target up to 60 per cent.

Reaching that level will require specialised technologies such as injecting carbon dioxide emissions under the ground or using super-computers as large as an apartment to create digital models of the reservoirs.

Abu Dhabi has only officially set such a high rate at one site – the Upper Zakum offshore field, where ExxonMobil is leading efforts to drill some of the world’s longest horizontal wells from a base of artificial islands.

“You can be a good drilling company, you can be a good refining company and so on but really this is a high-technology asset,” said Moss Daemi, the regional oil and gas director for DNV GL, a certification company that has also consulted for Adnoc.

“This whole sector of enhanced oil recovery is a very high-technology sector, and only very few have got the absolute highest level of techniques.”

The 75-year concession held by Total, ExxonMobil, BP, Royal Dutch Shell and Portugal’s Partex expires in January. Abu Dhabi Company for Onshore Oil Operations (Adco), the field operator that Adnoc has a majority stake in, says it will continue to pump 1.5 million barrels per day without the foreign majors for as long as the tender takes.

That could be up to a year, as indicated by Adnoc’s request for companies to submit a 40-year plan for the fields starting in January 2015.

Companies submitted bids last month for the auction, which was launched last year when Adnoc sent invitation letters to a dozen companies.

The next step is for Adnoc to submit its recommendation to the Supreme Petroleum Council, the emirate’s highest oil policy body.

Setting a recovery target is unusual for a production-sharing agreement, where operators are motivated to produce as much oil as they can to maximise their return. A target could place a partner in danger of breaching its contract if it has not produced a specific percentage of the reserves by 2055, according to Christopher Gunson, an oil-and-gas lawyer at Pillsbury.

“To say that you can operate a field in such a way to produce 70 per cent of the oil, that’s a unique way of putting it,” Mr Gunson said. “It’s very abstract standards of conducting business.”

Under the current concession, shareholders jointly operate a family of fields that includes Bab, Shah and Bu Hasa.

The foreign majors have criticised the structure for making it hard for them to deploy proprietary technology without exposing it to competitors.

Under the new arrangement proposed in Adnoc’s tender, the fields would be divided into four, and one company would take the lead in exchange for receiving a tax credit correlated with their capital investment.

That could allow companies to deploy more experimental technologies such as carbon injection, which Abu Dhabi has been trying to use for several years.

Mr Daemi said: “You and I today talk about 70 per cent being challenging, but maybe in 10 years the target will be 80 per cent. The technology is advancing all the time.”