Text size:

  • Small
  • Normal
  • Large
The order books of local rig builders are swelling with demand. Mike Young / The National
The order books of local rig builders are swelling with demand. Mike Young / The National

Abu Dhabi's oil ambitions hit by rigs shortage

Shortage of drilling rigs threaten Abu Dhabi oil production as order books of rig builders fill up

A shortage of drilling rigs threatens to hold back Abu Dhabi's ambitious plans to expand oil production.

Operating companies and foreign partners in exploration projects privately complain of difficulty in securing rigs to develop resources in the emirate.

At the same time, the order books of local rig builders are swelling with demand. Lamprell and Petrofac, two fabricators with UAE shipyards, had a combined order backlog of US$10.9 billion (Dh40.03bn) by midyear, up from just under $9bn in 2010.

Although near-term needs appear to be met - the Shah sour gasfield, the Upper Zakum redevelopment and Shuweifat to the west have enough equipment on site or scheduled for delivery - long-term expansions in Abu Dhabi's pumping capacity could be constrained.

"There is a shortage that could potentially stifle efforts to increase production," said Grant Paterson, the business development manager for SPD, a drilling consultancy. "The rig is the key piece of equipment - without it you can't do anything."

Regionally, the Middle East needs to double the number of rigs from the current level of 351, said Chris Faulkner, the chief executive of Dallas' Breitling Oil and Gas. For unconventional projects such as fracking that require many wells, the regional fleet would have to expand by a factor of five to 10.

Hanging in the balance is Abu Dhabi's master plan to raise oil production capacity to 3.5 million barrels per day (bpd) from levels of about 2.8 million today.

The first phase of that is expected to be completed this year and will bring the emirate to 3 million bpd, bringing the UAE in line with Iran and Iraq, the two countries that vie for the title of Opec's second-biggest producer.

Gas production is also a top priority with power generation needs growing by 11 to 12 per cent a year because of energy-intensive steel and petrochemical plants.

The expansion is being carried out by multibillion-dollar projects ranging from extracting toxic sulphurous gas from Shah to building artificial islands to use as bases for drilling wells as long as 10 kilometres.

OMV, Wintershall and Korea National Oil Corporation are currently involved in exploration ventures in Abu Dhabi. China National Petroleum is expected to follow soon if it is awarded a concession.

"Most of the joint ventures are really aggressively seeking production capacity expansions, so when you look at what Adma [Abu Dhabi Marine Operating Company] is doing, Adco [Abu Dhabi Company for Onshore Oil Operations], Zadco [Zakum Development Company], it's really a very ambitious plan to increase capacity for the UAE, and of course to really increase that capacity the UAE needs to drill more wells," said Morten Maurtizen, the UAE country manager for ExxonMobil.

National Drilling Company, a subsidiary of Abu Dhabi National Oil Company, secures all the rigs for projects in the emirate, including two renovated rigs for ExxonMobil's joint venture project at Upper Zakum and four new ones on order from China.

But they don't come cheaply.

"The rig rates have shot up with the oil price," said Rainer Seele, the chief executive of Wintershall. "Not only the rates have gone up, but also the drilling activities have increased significantly."

Rigs are moving over longer distances than before, he added, as exploration and production move into the Russian Arctic, Chinese shale and other frontiers.

Rig manufacturers are racing to keep up with demand driven in part by a wave of drilling in North America triggered by shale gas, where fracking requires pockmarking the land with wells. Out of an average 3,436 rigs deployed around the world today, 1,943 are in North America, according to the latest count from Baker Hughes, an oilfield services company.

"Only so much horsepower exists on the planet to drill oil and gas wells, and only so much new horsepower is built every year," said Mr Faulkner. "They're not going to build them in two days - it takes time."

* with additional reporting by Florian Neuhof

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 An air traffic control tower is seen at the central terminal of LaGuardia Airport on April 8, 2014. Shannon Stapleton / Reuters

In pictures: New York’s LaGuardia Airport in need of a rebuild

With constraints on its resources and no appetite for further debt, private investors and developers are being tapped to rebuild the 50-year-old central terminal for $3.6 billion, instead of using traditional public finance methods.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 An Uber taxi driver drives his car through a street in New Delhi, India. Saurabh Das / AP Photo

In pictures: On-demand cab service app Uber targets India

Taxi-hailing smartphone app Uber is making a big push into Asia with the company starting operations in 18 cities in Asia and the South Pacific including Seoul, Shanghai, Bangkok, Hong Kong and five Indian cities in the last year.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National