Hail and Ghasha galvanises UAE upstream market
12 October 2023
This package on the UAE’s upstream sector also includes:
> Adnoc seeks commercial bids for Upper Zakum
> Adnoc Onshore awards Sahil field upgrade contract
> Dubai-owned Dragon Oil to boost production in Egypt and Iraq
> Oil and gas players at Adipec strive for net-zero goals
> Adnoc awards $17bn EPC contracts for Hail and Ghasha
> Dana Gas makes changes to leadership
The UAE has made a giant leap towards becoming self-sufficient in natural gas production with Abu Dhabi National Oil Company's (Adnoc's) final investment decision on the Hail and Ghasha offshore sour gas project.
Adnoc and its partners in the Ghasha concession awarded contracts worth $16.94bn in early October for engineering, procurement and construction (EPC) works on the Hail and Ghasha project.
The investment represents the largest-ever capital expenditure (capex) on an oil and gas project in the UAE. As such, it will have a galvanising, trickle-down effect on the UAE oil and gas supply chain.
Hail and Ghasha programme
The Hail and Ghasha fields are part of Abu Dhabi’s Ghasha concession, which is expected to produce more than 1.5 billion cubic feet a day (cf/d) of gas before the end of this decade.
Adnoc holds the majority 55 per cent stake in the Ghasha concession. The other stakeholders are Italian energy major Eni with 25 per cent, Germany’s Wintershall Dea with 10 per cent, and Austria’s OMV and Russia’s Lukoil, each with 5 per cent.
A consortium of Abu Dhabi’s National Petroleum Construction Company (NPCC) and Italian contractor Saipem was awarded the project's offshore engineering, procurement and construction (EPC) package. Its value is $8.2bn, with Saipem declaring its share to be worth $4.1bn.
The scope of work broadly involves the EPC of offshore facilities, including facilities on artificial islands and subsea pipelines.
Italy-headquartered Tecnimont was awarded the onshore EPC contract. The $8.74bn contract relates to the EPC of onshore facilities, including carbon dioxide (CO2) and sulphur recovery and handling.
The Hail and Ghasha project was initiated by Adnoc in 2018, with at least three EPC tendering rounds since. Its size and scope made it a vastly strategic proposition, hence shelving the gas production programme was not an option.
Through achieving the FID and awarding close to $17bn-worth of EPC contracts, Adnoc and its Ghasha concession partners have demonstrated the project's importance in ensuring the UAE is self-sufficient in gas by 2030.
NEWS FROM ADIPEC:
> Adnoc doubles 2030 carbon capture target
> Adnoc Gas awards $615m carbon capture contract
> Adnoc and Oxy to study direct air capture project
> Firms bid for Abu Dhabi airport tank farms project
> Sharjah and Ras al-Khaimah sign gas storage deal
Oil production push
Adnoc is also accelerating projects deemed vital to reaching its goal of 5 million barrels a day (b/d) of oil production potential by 2027, a target that has been brought forward from 2030.
Raising output from Abu Dhabi’s offshore oil fields is necessary for Adnoc to increase its overall crude production capacity. With this in mind, the Abu Dhabi energy giant has committed capex to key projects to raise output from the Upper Zakum and Lower Zakum offshore hydrocarbon concessions.
Through the UZ1000 project, Adnoc Group subsidiary Adnoc Offshore aims to grow oil production from Upper Zakum to 1.2 million b/d.
The main work scope involves the EPC of multiple surface facilities and plants at the Upper Zakum offshore development’s four main artificial islands of Al-Ghallan, Umm al-Anbar, Ettouk and Asseifiya – also known as Central Island, West Island, North Island and South Island, respectively.
Contractors submitted technical bids for EPC works on the Upper Zakum oil production increment project by 5 June. Adnoc Offshore has set a deadline of 23 October to submit commercial bids for the project.
Separately, Adnoc Offshore has undertaken a couple of projects to increase oil and gas production from the Lower Zakum field in Abu Dhabi’s waters.
Adnoc Offshore and its partners in the Lower Zakum concession 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. This target will be achieved through the Lower Zakum early production scheme 2 (EPS 2) and proved developed producing (PDP) project.
Contractors submitted technical bids for the EPC works on the Lower Zakum EPS 2/PDP project by 11 September. While the EPS 2/PDP project is anticipated to increase the Lower Zakum concession’s oil production potential to 470,000 b/d by 2027, Adnoc Offshore’s larger, longer-term objective is to raise the asset’s output capacity to 520,000 b/d by 2027 and maintain that level until 2034.
This strategic goal will be accomplished through the Lower Zakum Long-Term Development Plan (LTDP-1) project. Front-end engineering and design (feed) work is progressing on the Lower Zakum LTDP-1 project and is being performed by France’s Technip Energies.
Onshore oil output
Adnoc Onshore, meanwhile, has started a slew of projects to spike crude output from fields such as Asab, Bab, Northeast Bab, Bu Hasa, Mender, Qusahwira, Sahil and Shah.
An EPC contract, estimated to be worth more than $300m, for the third development phase of the Sahil oil field was recently awarded by Adnoc Onshore to local contractor Target Engineering Construction Company.
Another project being pursued by Adnoc Onshore relates to the conversion of wells and installation of associated tie-ins at the southeast cluster of oil fields in Abu Dhabi. The EPC scope of work has been divided into two packages, with technical bids submitted by contractors in August.
Increasing production from Abu Dhabi’s onshore fields, some of which have been in operation since the 1960s, is equally crucial for Adnoc to hit its 5 million b/d by 2027 target. The capacity enhancement projects that Adnoc Onshore has been advancing indicate the importance its parent entity attaches to maintaining and raising output from its onshore assets.
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Macro risk
Despite policy ambition, the most immediate determinant of Iraq’s fiscal room is the oil price. A $10-a-barrel drop can reduce government revenue by an estimated $7bn-$9bn annually. Such sensitivity matters because infrastructure spending is still largely funded by the public purse. Oil price swings affect project awards, payment cycles and the government’s willingness to assume up-front capex obligations.
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Oil and gas upstream remains the single largest driver of capital expenditure. Major developments, including the Gas Growth Integrated Project (GGIP) and Mansouriya, sit alongside a push to reduce gas flaring and expand downstream processing. The objective is to sustain export revenues while improving domestic fuel availability.
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The latest escalation involving the US and Israel with Iran has increased Iraq’s security risk premium. This is inflating materials costs and disrupting supply chains near eastern border zones. Even where projects are far from conflict areas, contractors are pricing in higher contingency for logistics and insurance. Iraq must also balance deep economic ties with Iran—particularly in energy—with Western investor expectations and sanctions-related compliance.
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Saudi Arabia’s Royal Commission for Riyadh City (RCRC) has awarded an estimated SR5bn ($1.3bn) contract for the construction of the Sheikh Jaber Al-Sabah Road project in Riyadh.
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Aecom to supervise Dubai Loop construction
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US-based Aecom has been selected for a contract to undertake design review and construction supervision services for the Dubai Loop transportation system.
The contract was tendered by Dubai’s Roads & Transport Authority (RTA), which signed a construction agreement with Elon Musk-backed firm The Boring Company.
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> Be recognised among the best in the industry at the MEED Projects Awards 2026 …
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