Oil majors look closer at Dubai

An oil plateform is seen in the background during a dhow race in Dubai. Thomas Hegenbart Agentur/ Focus / arabianEye.com

Dubai is becoming a more attractive prospect for oil exploration companies as the sustained high price of crude makes hard-to-access deposits more economical to exploit.

Production in the emirate peaked at 400,000 barrels per day (bpd) in the 1990s, and has declined to an estimated 60,000 bpd today - equivalent to fewer than four cargoes a month and a mere drop in the 2.6 million bpd pumped by the UAE overall.

But now major oil companies are giving it a second look.

Germany's Wintershall is sounding out opportunities in Dubai, said Rainer Seele, the chief executive, during a visit to the emirate this month. Royal Dutch Shell signed a memorandum of understanding last week to develop new oil and gas ventures with Thani Investments, a Dubai conglomerate in the energy and mining sector.

"We have recently looked to see if there are EOR [enhanced oil recovery] opportunities in the Emirates outside Abu Dhabi in Dubai," Matthias Bichsel, the executive director of project and technology for Shell, told The National. "We have people out there in the field that are continuously demonstrating what technology offerings we have."

The agreement with one of the world's biggest oil majors could help to change the fortune of a place not comprehensively assessed for hydrocarbons for two decades.

Dubai made its first discovery in 1966 with the offshore Fateh oilfield. But that was its largest to date. South-west Fateh, Falah and Rashid followed, along with techniques such as water injection and gas lift to keep up pressure.

In 2010, at the height of the debt crisis, the emirate announced the discovery of a fifth field, later named Al Jalila.

The discovery did not halt an output decline that has made Dubai vulnerable to oil price fluctuations.

Meanwhile, Dubai Petroleum, the government entity that operates offshore fields, has commissioned a study of potential tight or shale fields onshore and is expected to map the field early next year.

Fracking, the industry term for shooting water and chemicals into shale deposits, has been particularly successful in the United States and is set to come to the Middle East for the first time through a BP project in Oman.

"They are looking to see if they have resources like what we had in the US and what the impact would be for the future energy supplies of this region and the rest of the world," said Chris Faulkner, the chief executive of Breitling Oil and Gas, the Dallas company that carried out the two-year study for Dubai Petroleum. "They still think there's a lot of life in these fields, and maybe there is."

Dubai faces two major hurdles when it comes to shale: limited freshwater supply and onshore reservoirs as deep as 20,000 feet. Finding a way to use brackish water and developing rigs capable of making deeper fracks would help to make large shale development possible in the emirate, he added.

"This is not a place nor is this part of the world a place where you bring 1,500 rigs and just start drilling holes in the ground and learn through the drill bit," said Mr Faulkner. "Most of the world learns from studying data and looking at data, making calculated determinations of where they're going to drill and why. So that takes time."