No green light yet on Shah sour gas project

A final decision on the US$10 billion Shah sour gas project has still not been made by ADNOC and ConocoPhillips.

A final investment decision on the US$10 billion (Dh36.7bn) Shah sour gas project has still not been made by the Abu Dhabi National Oil Company (ADNOC) and ConocoPhillips, the US energy company, despite the two signing a joint venture agreement earlier this month. The investment decision would be made next year, said Sigmund Cornelius, the chief financial officer of ConocoPhillips.

"We had been operating informally under interim agreements at Shah. What you saw recently was just replacing the interim agreements to formally establish the joint venture," Mr Cornelius said. "So it should not be construed as a decision that was made to go forward with the project." The go-ahead would depend on the bids received for several key engineering, procurement and construction packages related to the proposed gasfield development, Mr Cornelius said.

ADNOC and ConocoPhillips announced their agreement on July 9, exactly a year after the two firms had signed a preliminary deal for the project, and two weeks after ADNOC managers told an international gas conference in Abu Dhabi that the companies were preparing to offer 10 engineering, procurement and construction packages for bidding by qualified contractors. "ADNOC and ConocoPhillips will jointly share the cost of the Shah gasfield development project," ADNOC said, adding that the estimated cost had fallen to $10bn from $13bn because of the economic downturn.

The Shah field, located south of Liwa, was discovered decades ago but left undeveloped because its gas contained a high concentration of deadly hydrogen sulphide and would be costly to extract and process safely. Abu Dhabi is now seeking to produce the gas to avoid a projected shortfall in fuel for power generation and industry. ConocoPhillips holds 40 per cent of the Shah joint venture, with the rest held by ADNOC.

If developed, the field would produce 1 billion cubic feet of raw gas a day, yielding 540 million cu ft a day of processed gas available to ADNOC's distribution network. [e-mail]