Royal Dutch Shell confirmed yesterday it had won the tender for Abu Dhabi's Bab sour gasfield, a technically challenging project that underpins the emirate's industrial diversification.
The announcement, which came as the President Sheikh Khalifa was on a state visit in London, came after more than a month of reports that the Anglo-Dutch major had been recommended by Abu Dhabi National Oil Company (Adnoc) for its low bid.
"We have more than 60 years' experience of safe and successful sour gasfield development globally and we will apply this experience, along with our leading research and development, and technology expertise, to the development of the Bab resource," said Peter Voser, the chief executive of Shell. "We value our long and successful partnership with Adnoc, and look forward to continuing to play a role in helping the United Arab Emirates meet its energy needs."
Shell, which lost in two previous bids for the similar Shah sour gasfield, beat out France's Total in the final bidding round. Adnoc recommendations are vetted by the Supreme Petroleum Council, the decision-making body that includes members of the ruling family.
The project is estimated to cost US$10 billion, and is technically challenging because of its 15 per cent sulphur content - a gas that can be deadly when released in large quantities - and 50 per cent carbon dioxide content, which can be corrosive and also poses risks when released. With the Bab field lying under strategic infrastructure at Habshan near population centres, there is little room for error.
Shell and Adnoc will form a joint venture, with Adnoc controlling a 60 per cent equity stake, that will operate the field 150 kilometres south-west of Abu Dhabi and supply the domestic market. Because of electricity demand growth of more than 10 per cent a year and forays into petrochemicals and industrial diversification efforts that rely heavily on gas, Abu Dhabi must either produce more or buy from foreign suppliers.
Through the Abu Dhabi Company for Onshore Oil Operations, the Adnoc subsidiary where Shell is a shareholder, Shell and other western majors pump oil from another section of the Bab field. The sour gas layer is estimated to yield between 500 and 800 cubic feet per day, according to initial tender documents, slightly less than Shah's projected 1 billion cubic feet.
Shah, which is operated by American Occidental, is due to start producing next year, three years after it signed a contract with Adnoc. Shell had been expected to win the contract for Shah after Adnoc twice recommended it.