Shah sour gas project is delayed again even as contracts are signed

Abu Dhabi Gas may take on new partner in venture this year.

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Abu Dhabi Gas Development Company has indicated the Shah gas development will be delayed by a further three to six months, even as it finalises more than US$5 billion (Dh18.35bn) of contracts related to the project. Gas from Shah would start flowing in the third quarter of 2014, Saif al Ghafli, the chief executive of the wholly owned unit of Abu Dhabi National Oil Company, said yesterday.

Mr al Ghafli's remarks indicated a delay from the early-to-mid-2014 project completion date he had forecast last month. That was already a stretch from the 2013 completion target set earlier by a joint venture between Abu Dhabi Gas and the US oil and gas firm ConocoPhillips and puts the project at least two years behind its original schedule. ConocoPhillips quit the Shah project on April 28 in a surprise move preceding by just one day the awarding of the five contracts that company officials signed yesterday in Abu Dhabi.

The emirate may select a new international partner for Shah this year, said Mr al Ghafli, reinforcing similar comments he made last month. "Normally, these things take a long time, from showing interest, to discussing terms and conditions," he said. "We're not going to hold things back. We awarded contracts, we're committed." The work packages were awarded to South Korea's Samsung Engineering, Italy's Saipem and a team comprising Spain's Technicas Reunidas and India's Punj Lloyd.

Yesterday's signing ceremony and the appointment last month of the US engineering firm Fluor as the project manager signal Abu Dhabi's determination to proceed with the ultra-sour gas development, which is needed to boost the emirate's supply of gas for power generation, industry and enhanced oil recovery. Analysts have suggested Royal Dutch Shell could be the front-runner to replace ConocoPhillips. The European company is one of a handful worldwide that are experienced in exploiting gas containing very high concentrations of hydrogen sulphide, which is toxic and corrosive.

Other qualified companies that might be interested include the US firms ExxonMobil and Occidental Petroleum, which, along with ConocoPhillips and Shell, bid on the Shah contract in 2007. The French energy group Total, which is understood to have expressed interest in developing Abu Dhabi's Bab gasfield in another proposed sour gas project, could also be a prospective replacement partner for the Shah development.

Shah would yield 540 million cubic feet per day (cfd) of sales gas after the removal of hydrogen sulphide, carbon dioxide and valuable gas liquids from 1 billion cfd of raw gas. About 10,000 tonnes per day of sulphur would also be produced. Last month, Abu Dhabi Gas signed a Dh1.1bn contract with the local construction firm Al Jaber Group for preparatory work such as road building at the Shah site, in the south-west of the emirate. It also struck an agreement with the US company Honeywell for operation, control, monitoring and protection of the gasfield.

Mr al Ghafli said a total of $5.6bn of contracts had so far been awarded for Shah. Further work packages would cover the transport of sulphur to Ruwais, on Abu Dhabi's coast, its storage there and dredging at the port.