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Abu Dhabi, UAEMonday 22 October 2018

Sharjah joins UAE's oil and gas exploration drive

Sharjah National Oil Company, on June 25, offered three blocks to companies to search for oil and gas

A new oil rig at Lamprell’s shipyard in Hamriyah, Sharjah. The emirate has embarked on its own oil exploration drive. Jaime Puebla / The National
A new oil rig at Lamprell’s shipyard in Hamriyah, Sharjah. The emirate has embarked on its own oil exploration drive. Jaime Puebla / The National

Sharjah is the latest emirate to join the UAE exploration party.

Quite independently of Abu Dhabi and Ras Al Khaimah, Sharjah National Oil Company, on June 25, announced it was offering three blocks to companies to search for oil and gas.

The policy is right; now it’s time for the geologists.

Area A surrounds the existing producing fields around the Sajaa industrial zone, with its western limit approximately following the E611 Emirates Road, and includes a deep gas find under the Sajaa field itself which has never been developed. Area B runs south of this location to around Al Madam, covering the gap between Sharjah’s own fields and the Margham gasfield in Dubai, which lies off the Lehbab-Hatta Road.

And Area C, the “inner thrust belt”, is the eastern part of the emirate’s contiguous territory, running up to the mountains.

The city itself, the adjoining offshore, and the east coast exclaves of Kalba and Khor Fakkan, have not been offered for exploration yet, but could be in future.

The mountains running from Musandam down the eastern side of the UAE and into mainland Oman are a “thrust belt”, where two of the plates forming the Earth’s crust have collided. Rocks of the eastern plate, part of a now-vanished ocean known as Tethys, have been pushed over the Arabian Plate. This forms underground domes and other structures which are potential traps for hydrocarbons, potentially as deep as 6,000 metres below the surface. Such mountain ranges hold major oil and gasfields in areas including the Rockies, the Zagros of Iran and the Iraqi Kurdistan region, the Caucasus, and the Peruvian Andes.

But despite the discovery of Sajaa and two other onshore gasfields, the last of which started production in 1994, Sharjah’s complex geology had defied earlier understanding and led to the drilling of numerous dry (unsuccessful) wells.

To drum up interest in its new bid round, the Sharjah National Oil Company itself acquired three-dimensional seismic data covering the whole of areas A and B, and also extending into Dubai. This survey uses the reflection of sound waves to form a picture of the geology. The 3D seismic analysis gives a much clearer picture than the older two-dimensional method, like identifying a face seen through a window instead of through frosted bathroom glass.

Last year, government-owned RAK Gas also carried out such a survey in its offshore area, as well as acquiring gravity data covering all its territory. Subtle variations in the strength of the Earth’s gravity are a further hint to what is going on below the surface. Providing such information to interested companies lowers their risk.

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The likeness of the geology of Sharjah and Ras Al Khaimah may provide useful hints. Attracting new exploration ideas and technologies from outside is vital. Major discoveries around the world over the past few years have involved fresh thinking – the ultra deep-water “pre-salt” in Brazil, the ancient limestone reef that holds Egypt’s giant Zohr gasfield, and tracing the match between Guyana and Ghana before the Atlantic Ocean opened.

The understanding of unconventional resources – particularly shale in North America – has also advanced enormously and Abu Dhabi in particular recognises potential. Next door, Oman has exploited “tight” (low-permeability) gas reservoirs to sustain its exports, while Bahrain seeks to produce offshore shale oil.

The coincidence of the three emirates’ bid rounds is not intentional but convenient. Abu Dhabi’s territory, with the prospect of giant oil and gasfields, should attract major firms. The other two emirates may generate interest from both large and medium-sized companies. Now business development teams can look at all three simultaneously.

Sharjah and RAK have taken extensive expert advice to make their legal and petroleum taxation systems attractive and competitive. Potential investors will be attracted by extensive existing infrastructure, in a stable and safe country with a skilled petroleum workforce. Any discoveries will find a ready market and attractive gas prices.

In their heyday in the 1980s and early '90s, Sharjah’s gasfields supplied all its demand and a large part of Dubai’s. They also yielded large quantities of condensate, a valuable light oil. But since then, overall production has dwindled. The Sharjah Electricity and Water Authority was forced to burn expensive diesel and fuel oil for power, putting it under financial strain and leading to rising prices for consumers.

This encouraged a search for new gas supplies, with a deal signed for pipeline imports with Mubadala-controlled Dolphin Energy in October 2016, and plans to start up a liquefied natural gas import terminal, the country’s third, next year. More domestic production would be preferable to imports, though. Oil and gas makes up just 2 per cent of the government budget, and more revenues would help to fill a modest budget deficit.

RAK signed up for Dolphin gas at the same time, but it would also like to find more oil and gas of its own, to power its growing industrial sector, and keep its under-utilised gas processing plant fully occupied.

Looking for petroleum is always an uncertain business, especially in such complex geology. With an exploration period up to six years, it will be some time before any production reaches consumers. But RAK and now Sharjah have taken the first steps on making the most of their hydrocarbon potential.

Robin Mills is CEO of Qamar Energy and author of The Myth of the Oil Crisis