ExxonMobils offshore Upper Zakum project costs drop from $18bn to $10-12bn, Nick Wilson writes from Abu Dhabi
As part of its drive to lift crude production capacity to 3.5mn b/d by 2018, two of Abu Dhabis state-owned ADNOC subsidiaries, Zakum Development company (ZADCO) and Abu Dhabi Marine Operation Company (ADMA-OPCO), are building or studying construction of artificial islands to develop offshore fields. ADNOCs stated goal is 3.5mn b/d production capacity by 2018, but this is its yearly average. MEES calculates it can achieve 3.6mn b/d by 2018 from 2.94mn b/d, based on the industry standard of 90 days sustainable output.
ZADCO ADNOC 60%, Japanese Oil Development Company (JODCO) 12% and ExxonMobil 28% will use ExxonMobils technology, which it developed on Sakhalin Island off the Pacific coast of Siberia, to lift production capacity in the Upper Zakum oil field to 750,000 b/d from 550,000 b/d, Andrew Swiger, Senior Vice-President of ExxonMobil, said at the ADIPEC conference in Abu Dhabi on 2 November. The plan to use extended reach drilling from four artificial islands will boost recovery rate to 70% from 50bn barrels of oil in place. The technology, combined with dropping costs in the construction industry, has helped lower the project cost from $18bn to $10-12bn, MEES understands. The first island will be finished by second quarter next year, and first oil will be produced by the first quarter of 2016, with the production build up phase completed by the third quarter that year, MEES understands. The concession for Upper Zakum expires in 2026, and ZADCOs operating concession for offshore fields Umm al-Dalkh and Satah expires in 2018.
While ExxonMobil is happy with its ZADCO partners, it is not however content with its position in ADNOCs onshore oil company ADCO, whose agreement expires in 2014. ExxonMobil has a 9.5% stake in the firm, the same as partners BP, Total and Shell. ADNOC has 60% and Portugals Partex 2%. The majors are reluctant to share their technology with rivals. ADNOC is keeping everyone guessing if it will renew the concession, find new partners, or award individual fields to each company. Mark Nolan, ExxonMobils Vice-President of Middle East and Russia, said his firm wants a unique partnership with ADNOC. It would prefer to operate individual fields with ADNOC rather than the current concession, which encompasses nearly all onshore fields. If ExxonMobil successfully boosts Upper Zakum output it may influence ADNOCs decision.
BP (14.66%) and Total (13.33%) also have stakes in ADMA-OPCO, whose concession to operate the two offshore fields Umm Shaif and Lower Zakum expires in 2018. It aims to lift its production capacity by 270,000 b/d from 600,000 b/d by 2018 and is considering building two artificial islands as part of the plan, Chief Executive Officer Ali Rashid al-Jarwan said at the conference. JODCO owns 12% and ADNOC 60%.
ADNOC is also in talks with international oil companies to take part in its $10bn, 500mn cfd sales gas Shah ultra-sour gas project. We are in talks to have a partner or many partners for this project, said Muhammad Sahoo, chief executive of ADNOC subsidiary Abu Dhabi Gas Industries (Gasco). ADNOC has recently established a new subsidiary Abu Dhabi Gas Development Company to implement Shah. Shell is the front runner to develop Shah, after ConocoPhillips pulled out of the project due to concerns about its profitability. Shell narrowly lost the bidding to Conoco when the project was awarded in 2008. ExxonMobil and Occidental Petroleum are also in the race. Earlier this year ADNOC appointed Fluor as project manager for Shah, to be the management consultant for the main process packages. Fluor carried out the FEED for the gas processing plant.
Copyright MEES 2010.
