Japanese consortium to explore for oil off Abu Dhabi

Japanese consortium to explore for oil above Abu Dhabi's offshore Hail sour gas field.

The Japanese consortium Abu Dhabi Oil Company(CK) (Adoc) is to explore for oil above the Hail sour gas deposit after winning an expanded oil concession offshore Abu Dhabi.

The group, led by the Japanese refiner Cosmo Oil(CK), holds 100 per cent of the new concession, for which it signed an agreement yesterday (Thu) with the emirate's Supreme Petroleum Council.

"Adoc will commence exploration activities in the Hail Field, which will include drilling appraisal wells, and will develop and produce crude oil in a highly efficient and cost effective manner through full utilisation of Adoc's existing facilities, taking into high consideration the protection of the environment in the area," the group said.

The new concession area covers the Mubarraz, Umm al Anbar and Neewat al Ghalan offshore oilfields from which Adoc has been pumping crude under a 45-year agreement due to expire next year. It also covers the Hail field, located in shallow water near the other three fields and a group of Abu Dhabi offshore islands southeast of the capital. The largest is Mubarraz Island.

The new 30-year contract is to take effect on the expiry of the original concession.

The three fields covered by that deal are considered minor compared with Abu Dhabi's main offshore oilfields - Umm Shaif, Zakum and Upper Zakum. The current output from Mubarraz is about 18,000 barrels per day (bpd), compared with more than 550,000 bpd pumped from Upper Zakum. Nevertheless, the combined output from several undeveloped oil reservoirs within the Hail field could peak at a level matching Adoc's existing production, the group said.

Abu Dhabi National Oil Company(CK) (Adnoc) has already established the presence of a deep gasfield in rock formations below the Hail oil pools, but the gas contains a high concentration of hydrogen sulphide. The presence of the toxic and corrosive impurity makes the Hail gas technically challenging to produce. Any gas leak could pose a serious threat to public health given the field's proximity to coastal settlements.

Abu Dhabi Gas Liquefaction Company (Adgas), an operating subsidiary of the Government-owned ADNOC, launched a study of the feasibility of developing Hail gas in 2008, but no contracts were awarded for the project.

The inclusion of the Hail area in the new Adoc concession suggests the proposed sour gas development has permanently shelved.

Like other oil pumped in Abu Dhabi, Hail's crude is also likely to contain hydrogen sulphide, although at a much lower concentration than in the underlying gas. This highlights the importance of Adoc's commitment to develop the oil in an environmentally responsible manner.

"The new concession agreement symbolises the excellent bilateral relations between the UAE and Japan," the group said. "Adoc's experience of more than 40 years in Abu Dhabi and the various environmental protection activities carried out by the company utilising advance technology such as zero gas-flaring and sour gas injection into reservoirs are all important factors that will continue to further the bilateral relations between both countries."

Eliminating "gas flaring", or the burning of gas produced with oil, prevents acid gas emissions from contaminating the environment while also cutting carbon emissions. Sour gas injection is a process in which dissolved hydrogen sulphide and carbon dioxide are recovered from produced oil and pumped back underground. The gases help to push out more crude and are eventually stored permanently in the depleted oilfield.

Adoc's two biggest partners are Cosmo, with 63 per cent, and JX Nippon Oil and Gas Exploration(CK) with 31.5 per cent. Three Japanese power companies hold much smaller stakes.

Japan is the biggest importer of Abu Dhabi crude, buying about 40 per cent of the emirate's petroleum exports.

In 2009, ADNOC signed a deal to store oil in Japan for marketing in the wider Asia-Pacific region.

In separate news regarding Abu Dhabi's offshore oilfields yesterday, Bloomberg reported that ExxonMobil(CK), which holds 22 per cent of a joint venture with Adnoc for the Upper Zakum concession, would invite bids on US$6 billion (Dh22bn) of contracts to boost output from Abu Dhabi's largest offshore oilfield to 750,000 bpd by 2015