Work starts on $10bn energy project

Adnoc and Occidental push forward with Shah gas development after finalising their joint venture.

Preparation continues at the Shah Gas Field, which involves the development of high sulphur content gas reservoirs, located onshore about 180km south-west of Abu Dhabi.

The partners in the Shah gas development are shifting mountains of sand to keep the strategic project on schedule after finalising their joint-venture agreement yesterday.

One of the early challenges of developing the gasfield is to establish a base amid a sea of shifting desert dunes from which deep deposits of sour gas can be safely exploited.

"Because of the dunes, we are building the main plant on three large, connected sabkhas," David Schulte, a technical consultant to the project, told an industry conference in Abu Dhabi this week.

He was referring to salt flats deep in the Empty Quarter where there used to be lakes. An army of earth-moving equipment is working to free the chosen site, about 180km south of Abu Dhabi near the border with Saudi Arabia, from encroaching dunes that are among the highest in the world.

Under the terms of the US$10 billion (Dh36.67bn) agreement signed yesterday in the capital, Abu Dhabi National Oil Company (Adnoc) and the US group Occidental Petroleum will share the cost of development.

Adnoc holds a 60 per cent interest in Al Hosn Gas, a UAE company formed last year to manage and operate the Shah project. Occidental is a 40 per cent shareholder in Al Hosn, replacing its US rival ConocoPhillips, which withdrew from the project last April. After a nine-month search by Adnoc for a new partner, Occidental agreed in January to join Al Hosn.

Despite the change of partners, the Shah gas project was still on track for completion in September 2014, said Tareq Sahoo, the senior vice president of Al Hosn. "Actually, we're ahead [of schedule]," he said.

Before Occidental joined the project, Adnoc had issued contracts for eight of 10 major development packages for Shah. A contract for a further work package to develop $2bn of sulphur storage and export facilities at the port of Ruwais was previously opened for bidding and was awaiting Adnoc's decision. That leaves only the final package for construction of the project's power and water plants to be tendered, Mr Sahoo said.

Because of the decision to divide work at the main Shah site into eight execution packages, several contractors are working at the site simultaneously, Mr Schulte said.

Mr Sahoo said a high-quality four-lane road had been completed to allow the transport of heavy equipment to the site. It would also facilitate rapid evacuation of workers in the case of any future emergency involving a gas leak.

Before the 27km road was laid, Mr Sahoo's car became bogged 11 times in the soft mud underlying the salt flats during the course of a single site visit, the executive said.

To safeguard employees once the gas starts flowing, almost all the equipment used to produce and process the gas laced with as much as 23 per cent toxic hydrogen sulphide would be segregated in a "red zone" on just one of the sabkhas, Mr Schulte said. Everyone entering the zone would be required to don self-contained breathing apparatus, similar to that used by divers, with a 45-minute supply of air. Workers would set aside the apparatus on reaching an indoor environment with a central supply of clean air.

Facilities in the red zone will be equipped with staircases instead of ladders to make it easier for workers carrying air tanks to move around, and all metal components will be made from corrosion-resistant alloys. Although the safeguards added significantly to the construction cost, the design features were necessary because "a big percentage of the plant is considered lethal", Mr Schulte said.

Before any sour gas is produced, the integrity of the plant will be tested by running "sweet gas" through it from Adnoc's existing supply of gas from which all traces of hydrogen sulphide have been removed.