The Oil Industry
OIL and GAS (last updated on 20/08/1996)
The contribution of the oil and gas sector to the UAE's Gross Domestic Product, GDP, fell yet again in 1994, to an estimated 33.7 per cent of the total, down from 35.9 per cent in 1993 and over 50 per cent in the early 1980s. Two main factors account for the continued decline, first the weakness of international oil prices, and second the rapid growth enjoyed by the non-oil sector as a result of the success of Government policy attempting to diversify the economy away from reliance on depletable hydrocarbons. The fall in percentage of GDP was not, however, matched by a similar percentage fall in the overall value of the oil and gas sector, which contributed a total of Dh 45 billion, only slightly down from the 1993 figure of 47 billion, due primarily to the weakness of, and fluctuations in, the international market. The UAE's firm policy of adhering to its OPEC quota of 2.16 million barrels a day meant that an increase in production to make up for low prices was, as usual, ruled out. At current prices, the GDP has been forecasted to rise by 5.6 % in 1996.
The country's proven recoverable oil reserves of around 98 billion barrels are the third largest in the world, after Saudi Arabia and Iraq, accounting for some 12 per cent of the reserves of the OPEC countries and 9.8 per cent of world reserves. Gas reserves, also third largest, are 6.13 trillion cubic meters. More than 90 per cent of the oil reserves are in the emirate of Abu Dhabi, which also accounts for nearly 85 per cent of the country's daily production of around 2.16 million barrels.
Despite the depression of oil prices over the course of the last few years, Abu Dhabi has continued to invest heavily in the expansion of production facilities, with around five billion US dollars having been invested over the course of the last five years, and with a number of major new projects, including a new refinery and petrochemical complex at the industrial center of Ruwais, being planned. By the end of the century, sustainable production in Abu Dhabi should rise to around 2.6 million barrels a day, with a further 300,000 bpd or so being accounted for by capacity in Dubai, Sharjah and Ras al Khaimah, the other three producers of hydrocarbons.
Oil and gas policy in Abu Dhabi is determined by the emirate's Supreme Petroleum Council, chaired by Crown Prince Sheikh Khalifa bin Zayed al Nahyan. Whilst this sets policy guidelines, operational matters are handled on behalf of Government by the Abu Dhabi National Oil Company, ADNOC.
The production of oil is undertaken by a number of joint-venture companies, with the bulk of Abu Dhabi's daily production of around 1.9 million barrels per day being produced by joint venture companies within the ADNOC Group. The largest, with a sustainable production capacity of around one million barrels per day, is the Abu Dhabi Company for Onshore Oil Operations, ADCO,which is 60 per cent owned by ADNOC, on behalf of Government, and 40 percent owned by a consortium of international oil companies. Major offshore operators are the Abu Dhabi Marine Operating Company, ADMA-OPCO, (60 percent ADNOC and 40 per cent an international consortium); and the Zakum Development Company, ZADCO (88 percent ADNOC and 12 percent a group of Japanese companies).
There are also a number of smaller fields operated by the Abu Dhabi Oil Company of Japan, ADOC, and Total Abu al Bukhoosh, which, although without a Government shareholding, also follow policy guidelines laid down by the Supreme Petroleum Council.
The bulk of the capital investment undertaken over the course of the last few years has been made by ADCO, ADMA-OPCO, and ZADCO. ADCO alone has increased sustainable production capacity of the giant Bab field from 80,000 to 350,000 barrels per day, and also brought three new fields onstream in late 1994 and early 1995, at Shanayel, Rumaitha and Dhabb'iya.
Development drilling, amounting to a total of 821,009 feet, was carried out both onshore and offshore with production capacity being increased in a number of fields, including the onshore Shah and Sahil fields in the ADCO concession area. Besides supervising the joint-venture companies, ADNOC also undertakes oil exploration in its own right, and during 1994, undertook extensive seismic and other exploration work at its sole risk concession areas, both onshore and offshore. This included a 2-D land seismic survey on West Horeima, a 3-D shallow marine survey on Zirku/Qarnein, a 2-D land seismic survey on Onshore Block 1 and Open Area 1, a 3-D land sesimic survey in the Al Ain area and a 3-D shallow marine survey in the Muhayimat area, as well as other seismic survey work undertaken on behalf of ADCO and ADMA-OPCO.
The main operators, ADCO and ADMA-OPCO, also continued programs of exploration and of delineation of previously identified but undeveloped reserves during the course of 1994, adding new proven reserves of hydrocarbons to help offset the drawdown from production.
Between them, ADNOC, ADCO, and ADMA-OPCO drilled a total of 99,978 feet in exploration and appraisal wells, while evaluation of results from early seismic work and exploration drilling was also undertaken on a number of reservoirs, in particular those in the giant, but as yet undeveloped, Ghasha/Bu Tini field offshore. Under the terms of the oil exploration concession agreements in operation in Abu Dhabi, the ownership of any associated or non-associated gas remains with Government, and the heavy investment in the hydrocarbons industry of the last few years, has been to a considerable extent focused upon the development of gas resources, both through joint-venture gas operating companies, Abu Dhabi Gas Industries, GASCO, onshore, and the Abu Dhabi Gas Liquefaction Company, ADGAS, offshore, both part of the ADNOC Group, and by ADNOC itself.
Work on one of the largest projects, the tapping of gas reserves in the onshore Bab oilfield, commenced in late 1994. Costing an estimated $1.35 billion, the Onshore Gas Development Project, OGD, will more than treble capacity of ADNOC's Habshan Gas Processing Plant from 540 million standard cubic feet per day, mmscfd, to 1,865 mmscfd, with recovery of light condensates rising from 5,000 barrels per day to 130,000 bpd, and 5,900 tons a day of natural gas liquids (NGL). The project, being carried out by an international consortium headed by Bechtel, involves the installation of a gas gathering network for the Bab field's Thamama 'C' and 'F' reservoirs, while two trains, each of 350 mmscfd, are being installed to process combined streams of Thamama 'B' associated gas and Thamama 'C' non-associated gas. There will also be a 625 mmscfd train for processing non-associated gas from Thamama 'F' as well as a new compression station with a capacity of 830 mmscfd, mainly to cater for the gas injection requirement of the Thamama 'F' reservoir.
The project, when completed, will double Abu Dhabi's onshore gas production, and will provide feedstock for power and desalination plants, and for injection in oil reservoirs. A substantial amount of gas will be supplied to the 1.8 billion Taweela B power and desalination plant, via the $190 million Bab-Maqta-Taweela pipeline, while another pipeline is also being built to supply 212 mmscfd of gas to the $490 million Mirfa power and desalination plant, currently under construction.
Offshore, ADNOC completed, at the end of 1994, the Umm Shaif Gas Development Project, which raised production capacity from 400 to 1,045 mmscfd, for supply to the expanded Das island plant of the Abu Dhabi Gas Liquefaction Company, ADGAS. Expansion of the plant was completed in November 1994, and involved the building of a third production train, the biggest in the world, at a total cost of around $1.3 billion, which doubled capacity to nearly five million tons a year of liquefied natural gas. The bulk of production is exported to the Tokyo Electic Power Company, TEPCO, under the terms of a 25 year supply agreement, while four specialized tankers have been purchased by ADNOC, with the last due for delivery in late 1995. One, Al Khazna, is the biggest LNG carrier in the world, with a capacity of around 137,000 tons. Overall, gas production in Abu Dhabi rose from 1,826 mmscfd in 1993 to 2,052 in 1994. This substantial investment in the expansion of Abu Dhabi's oil and gas production facilities will not only help to increase the supplies available for export to meet growing world demand, but will also cater for the rapid expansion of local consumption, which reached a total of 405,000 barrels per day of oil and gas in 1993, the last year for which detailed figures are available, compared to 386,000 bpd in 1992 and 313,000 bpd in 1989.
The bulk of the country's demand for refined products is met by ADNOC, which supplied around 86 per cent of demand in 1994, the remainder being imported primarily to Dubai. During 1994, the two ADNOC refineries at Umm an Nar, outside Abu Dhabi city, and Ruwais, processed an average of 226,000 bpd, equivalent to 110 per cent of design capacity. Products included ordinary petrol for motor fuel, as well as other grades for shipping and aircraft.
In early 1995, the Supreme Petroleum Council endorsed plans to double the 130,000 bpd capacity of the Ruwais refinery at a cost of over $1 billion. The expansion will also add facilities for the processing of 120,000 bpd of condensate from the Bab gas development, as well as for production of more sulphur. In this connection the granulation capacity of the Ruwais sulphur terminal is being increased to 4,250 tons per day.
Condensate is also used by the Umm an Nar plant of National Chlorine Industries, which produced a total of 11,250 tons of chlorine and 12,4000 tons of caustic soda in 1994, the bulk of which was supplied to the Abu Dhabi Water and Electricity Plant, with the balance being sold to local firms and for export. While developments in the oil and gas industry in Abu Dhabi continued, as usual, to take the limelight during the course of the past year, significant developments were also undertaken in the industry in Dubai and Sharjah, both significant producers of hydrocarbons, although on a much smaller scale.
Dubai, with an estimated four billion barrels of oil reserves, produced around 280,000 bpd, down from a 1990 peak of 425,000 bpd. Its offshore operator, the Dubai Petroleum Company, DPC, has been focussing efforts in recent years on horizontal drilling and on enhanced oil recovery, EOR, in order to attain a level plateau of sustainable production. The horizontal drilling program, in which the UAE is a leader in the Arabian Peninsula, has proved to be particularly successful, with well yields four times better than average. Results from a pilot-scale test due in 1996 of an EOR project for miscible gas injection in part of the offshore Fateh field will determine the economic feasibility of full scale implementation of the scheme.
In Sharjah, onshore operator AMOCO Sharjah substantially expanded production of gas from its gas and condensate Saja's field, and further developed nearby small fields, helping to boost the UAE's daily gas production by around fifteen per cent.
Adipec, the 7th Abu Dhabi International Petroleum Exhibition will be held between October 13-16 at the Abu Dhabi Chamber of Commerce and Industry.
Marketing
The marketing and distribution of oil products in Abu Dhabi is carried out by a subsidiary of ADNOC, called ADNOC-FOD, which was awarded the eighth International European Quality Trophy for the year 1994. The Trophy was presented to it by the 12000- member world commercial firms club which represents 112 countries. The prize, launched eight years ago, was designed to encourage developing countries to increase trade with Europe and reflected the success of ADNOC-FOD in marketing its high quality lubricants to Europe.
The continued rapid development of the UAE's economy has seen a steady increase in demand, both from industrial and domestic users, for gas and refined petroleum products. The bulk of the country's production, however, is still exported to markets worldwide, much of it, particularly from Abu Dhabi, under long term contracts with refiners. The major destination for UAE exports, of both oil and LNG, remained Japan, which purchases around a quarter of its total oil imports from the Emirates, and, if gas is taken into account, obtains up to 28 per cent of its entire energy requirements from the UAE.
A typical month, August 1994, saw Japanese refiners purchasing 1.313 million bpd of crude oil from the UAE, or around 60.2 per cent of total production. Other customers include refiners in France, Belgium and Spain, while, under the terms of the agreements between ADNOC and its joint venture partners in ADCO, ADMA-OPCO and ZADCO, the partners are entitled to uplift crude equivalent to their percentage shareholdings, either for their own refineries or for sale.
Gas Production
UAE installs biggest gas liquefaction plant.
The UAE has commissioned an expanded gas liquefaction project that will sharply boost its gas earnings and place it among the top LNG producers in the world. The one-billion-dollar project, which involved the installation of the world's biggest production train, doubled output at the liquefaction plant on Das island to nearly five million tons per year.
All the production will be exported to the Japanese Tokyo Electric Power Company (TEPCO) under a 25-year supply contract starting in 1994. TEPCO has imported all the plant's output since it started in the early 1970s. The Das project, launched four years ago, has been inaugurated and supplies have already started, with the delivery of two shipments in the first three months. They were transported by two new vessels built in Japan under a 600-million-dollar deal that includes two other tankers.
The Emirates, March 27, 1994
At present rates of extraction the UAE's gas reserves will last for 364 years.
If oil has provided the food upon which the present-day UAE has depended for much of its growth to date, natural gas may well prove to be the drink that sustains it long into the future; even beyond the projected life of the country's oil reserves. Estimated at 6.13 trillion cubic meters the UAE has the fourth largest gas reserves in the world, after those in Russia, Iran and Qatar.
Details of the UAE's oil production are not publicly announced, but figures for the production of Liquefied Natural Gas, LNG, Natural Gas Liquids, NGL, and other products from the associated and non-associated gas reservoirs in Abu Dhabi are revealed. In 1994, Abu Dhabi produced a total of 8.275 million tons of natural gas and products, with off-shore ADGAS, accounting for 4,275 million tons of LNG and onshore GASCO producing 4 million tons of NGL and by-products. The whole of GASCO's production was exported, while ADGAS exported 4.23 million tons, the remainder being used as feedstock in the Das island industrial complex. Whilst GASCO exports went to a wide range of customers, the major purchaser of ADGAS LNG was Japan's TEPCO, which has taken an average of nearly 2.5 million tons LNG a year since 1977. Under the terms of the new supply contract, TEPCO will eventually take the whole production from the newly expanded ADGAS plant, further strengthening the mutually beneficial supply-and-demand relationship between the UAE's oil and gas industry and Japanese consumers.
Emirates News
Umm Shaif Gas Development Project Completed.
Abu Dhabi National Oil Company, ADNOC, has announced that it has completed work in the Umm Shaif field in order to meet ADGAS' additional requirement of gas for the new third LNG train.
The Umm Shaif Gas Development Project was commissioned in November with an objective of increasing the number of gas producing wells in order to boost the current gas supply level from 400 to 1,045 million standard cubic feet per day. This will supply the extra demand for gas for the third LNG train on Das Island. The commissioned project will generate additional production and sale of condensate, natural gas liquids, NGL, and sulphur. It will provide sufficient gas for injection into other oil and gas reservoirs such as Arab 'D', Thamama, Uweinat, and Upper Araej Formations, in order to maintain reservoir pressure, prolong the life of the reservoir and enhance oil recovery.
The scope of work comprises drilling and completion of 14 gas producer and injector wells. For gas gathering, new flowlines will be installed between a new gas treatment platform at Umm Shaif Super Complex and three new well-head towers. In addition, a fourth new flowline will be installed to tie in gas wells on one of the existing well-head towers.
ADNOC said that gas received from well-head towers via the new flowlines would be separated from condensate and would be dehydrated at the new gas treatment platform. Dehydrated gas would be exported to Das Island via the newly installed 46-inch main gas line. Condensate would be transferred to Das Island through the existing 18-inch condensate line.
ADNOC applied various modern techniques for the upstream part of the project (wellhead towers, gas injectors, gas gathering system and gas treatment plants). A new production injection technique was implemented to produce high pressure Khuff dry gas and inject it into Uweinat Cap Gas Reservoir with minimum control facilities/equipment and less capital/operating cost. Solar systems are used to provide power for telemetry, fire and gas detection, and chemical injection systems. Despite the extensive, and successful, efforts by the UAE to diversify its economy away from dependence on hydrocarbons, the oil and gas sector remains of crucial importance in underpinning the national economy. During the course of the last year, the sector continued to grow, against a background of international weakness in the oil market. Heavy investment programs now underway should help to ensure that the UAE consolidates and strengthens its place as one of the world's major energy producers.
Oil and the Environment
UAE's Oil Pollution Disaster.
April 3rd 1994
Several thousand gallons of oil washed ashore on beaches between Khor Fakkan and Dibba in the Emirate of Fujairah as two super tankers, UAE-registered Bayuna, which belongs to the Abu Dhabi National Tankers Company, ADNATCO, and the Panamanian-registered Seki, collided nine miles off the coast of Fujairah on March 30. Seki was laden with a cargo of 270,000 tons of Iranian crude and was on its way to Japan while the Bayuna was returning home from the Far East.
The Fujairah Government has issued an urgent appeal for help to avoid a major marine disaster. Following the collision, large quantities of oil have come ashore on the beaches, accompanied by dead fish, turtles and other forms of marine life. Scientific investigators have been sent to the area to assess the damage to the beaches and to marine life. Environmental and pollution control experts from the Federal Environmental Agency, Abu Dhabi National Oil Company, Fujairah Port Authorities and several local firms are engaged in fighting the oil slick and two British experts on oil pollution will study means to tackle it. According to the Master of Seki, approximately 15,900 tons of oil has leaked from the vessel into the sea. Government officials have appealed for local and international help in the clean-up process.
News of the UAE's largest ever oil pollution spill, which occurred at the end of March 1994, was carried by national and international press and was a cause of grave concern for the UAE since the oil threatened to spoil a vast stretch of coastline and to affect an area of special scientific interest at Khor Kalba where mangroves create a habitat for a number of endangered species, including an endemic Arabian kingfisher, named after the Fujairan creek.
The collision which took place 9.6 nautical miles off the Fujairah coast resulted in heavy damage to the Panamanian ship which was carrying a cargo of Iranian crude oil: roughly 16,000 tons of which spilled into the sea, spreading over a total of 40 nautical sq. miles, and threatening to cause serious damage to marine life, affecting the area's important fishing industry.
The response for the call for assistance from Fujairah was immediate with the UAE Cabinet approving a special allocation of funds to help pay for the clean-up of the sea and beaches. The funds were used to obtain the necessary equipment for the clean-up operation and to ensure that any necessary advice from abroad was obtained. The Federal Environment Authority co-ordinated with local and international firms to find a quick and lasting solution to the environmental crisis. Meanwhile the Fujairah Government and Fujairah Seaport Authorities lodged a $200 million compensation claim against the two oil tankers involved in the incident.
Oil Recycling
India's Western Oil Corporation opened a Dubai plant to recycle oil waste from refineries, service stations, generators and ships into base stock, which is used for making lubricating oil. The system can also be adjusted to turn fuel oil into higher-value diesel. The Dubai plant at a cost of around $ 4 million is producing around 20,000 to 25,000 tonnes per year of base stock.
An alternative way of disposing of oil sludge has been established by the Environmental Protection and Safety Section of the Dubai Municipality at the Jebel Ali Free Zone. This can break the sludge into solvents, water and oil. The plant has been set up at a cost of $ 10 million. The oil recovered from the sludge, can be recycled and sold as low-grade crude.
Petrochemical Industries
"Added-value" is a key phrase in the UAE's present and forward planning of its oil and gas industries. Forecasting strong international competition in this field, the UAE's major refiner, ADNOC, took steps some years ago to position itself to deal with modern developments and to operate at maximum efficiency. In consequence it is competitively positioned to sell middle distillates, which constitute much of the world's increased product consumption.
Marking the first step of the UAE into the Petrochemical Industry, ADNOC announced last June 1996, its 1-1.5 billion dollar contract with Borealis ( a Scandinavian group) to build its first petrochemical plant, in the chosen area of Ruwais, which lies to the west of the capital. The 450,000 ton polythene plant project will use gas supplied by the Abu Dhabi Gas Industries Company (GASCO), to produce high density and low density polythene and ethylene which can be turned into bulk plastics. Accompanying this project will be the upgrading of the Ruwais refinery, as part of the UAE’s overall energy sector expansion plans. The expansion project aims to add 135,000 barrels per day in capacity to the existing 135,000 b/d Ruwais capacity, by the year 2000, costing a total sum of 1.8 billion dollars.
Other projects involve the production of vinyl chloride monomer at a cost of $149.8 million as well as a formaldehyde project at a cost of $13.6 million.
The UAE's recent development of metals, petrochemicals and gas projects are aimed at offsetting the impact on its economy of falling oil prices. The Government is also stimulating private investment in other non-oil sectors. Whilst oil has played a vital role in its development, the UAE is focusing on alternative sources of wealth in order to reduce its medium to long-term reliance on oil, and to cushion the impact of oil market movements.
