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Adnoc’s upstream goals drive spending spree

23 October 2024

 

Abu Dhabi National Oil Company (Adnoc Group) spent close to $22bn last year on upstream projects – mainly on the $17bn Hail and Ghasha sour gas production project – making it one of the best years on record for oil and gas project spending in the UAE.

While the energy giant may not be able to match its 2023 level of capital expenditure (capex) on oil and gas production projects this year, total capex on upstream oil and gas projects in 2024 is still expected to be steep, as Adnoc strives to attain an oil production capacity of 5 million barrels a day (b/d) by 2027 and become self-sufficient in gas production by the end of this decade.

In fact, if the Hail and Ghasha gas programme is put to one side, Adnoc has already exceeded last year’s upstream project spending level this year.

Key offshore projects awarded

Adnoc Group subsidiary Adnoc Offshore has been a driving force behind upstream project spending in the UAE this year, awarding engineering, procurement and construction (EPC) contracts for projects to increase the oil production potential of the Upper Zakum and Lower Zakum offshore oil field developments.

Located 84 kilometres (km) offshore in Abu Dhabi, Upper Zakum is the world’s second-largest offshore oil field and fourth-largest oil field. Adnoc Offshore launched the first phase of the programme to raise Upper Zakum’s oil production capacity to 1.2 million b/d in 2019. The initial goal was to increase the field’s output potential to 1 million b/d by 2024, which was later increased to 1.2 million, with the project execution timeline eventually being extended.

This target is to be achieved through the UZ 1.2MMBD EPC-1 project. In April, Adnoc Offshore awarded the main EPC contract for the project, worth $825m, to UAE-based Target Engineering Construction Company.

Separately, Adnoc Offshore and its partners in the Lower Zakum concession – located 65km northwest of Abu Dhabi – intend to sustain oil production from the asset at its current level of 450,000 b/d until 2025, and then increase output to 470,000 b/d.

To this end, Adnoc Offshore awarded the main contract for a project known as the Lower Zakum Early Production Scheme 2 and Proved Developed Producing to Abu Dhabi’s NMDC Energy in the second quarter.

Onshore project spending

The onshore business of Adnoc Group, Adnoc Onshore, has also been a major spender this year as it pushes ahead with projects earmarked for its parent company’s 5 million b/d target. In September, Adnoc Onshore awarded a contract, estimated to be worth $900m-$1bn, for a project involving the modification of wells at the Bab onshore oil field development in Abu Dhabi, to boost the asset’s crude production potential.

Abu Dhabi-based Robt Stone Middle East won the contract for the project, which is the second phase of a campaign by Adnoc Onshore to provide artificial lift to 184 new and existing wells at the Bab field’s seven reservoirs. Providing artificial lift to wells will help improve oil recovery from the reservoirs, sustain an oil production level of 485,000 b/d from the field and increase output beyond 2028.

Earlier in the year, Adnoc Onshore awarded main contracts worth a total of over $1.5bn for two packages on a project involving the conversion of wells and the installation of associated tie-ins at the South East cluster of oil fields in Abu Dhabi.

Package three of the project covers the EPC of well tie-ins and other associated structures at the Asab and Sahil oil fields, while package four covers the Shah, Qusahwira and Mender fields. Adnoc Onshore split the scope of work on the packages and appointed two contractors for each package.

Project capex on the rise

Adnoc Group’s upstream subsidiaries are expected to award further project contracts before the end of the year in order to stay on top of their targets.

Adnoc Offshore is set to award a major contract estimated to be worth $2bn for a project to increase production from the Umm Shaif offshore oil field in Abu Dhabi. US-based oil and gas contractor McDermott International is in line to win the main contract for the Umm Shaif Accelerated Development project.

The project aims to increase the Umm Shaif oil field’s output from about 275,000 b/d at present to 390,000 b/d by 2027, and to sustain that level of production until at least 2036.

Meanwhile, Adnoc Offshore could also award the main EPC contract for the multibillion-dollar Lower Zakum Long-Term Development (LTDP-1) project by the end of the year. The goal of the project is to raise the asset’s output capacity to 520,000 b/d by 2027 and maintain that level until 2034.

Contractors submitted technical bids for the Lower Zakum LTDP-1 project in August and are in the process of preparing commercial bids.

https://image.digitalinsightresearch.in/uploads/NewsArticle/12774070/main.jpg
Indrajit Sen

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