x Abu Dhabi, UAETuesday 23 January 2018

Minnows aid capital's upstream hydrocarbon plans

The entry of more oil and gas players into Abu Dhabi¿s upstream sector is fuelling the development of the UAE as a regional hub for the energy industry.

The entry of more oil and gas players into Abu Dhabi's upstream sector is fuelling the development of the UAE as a regional hub for the energy industry.

As ever-growing demand for oil has made the exploitation of inaccessible fields feasible, the number of niche players has increased and they are finding their way to the Gulf.

These companies are searching for opportunities in projects shunned by the big international oil companies (IOCs) - and Abu Dhabi is proving an attractive market.

"In Abu Dhabi we've seen a change in the domestic market place, which creates opportunity. There is a desire here in Dubai to change its levels of importance from an energy standpoint. I think these things go together," said James McCallum, chief executive at Senergy.

Abu Dhabi this year welcomed four new entrants to its oil and gasfields. Last week, Germany's Wintershall and Austria's OMV signed a deal with Abu Dhabi National Oil Company (Adnoc) to appraise a gas field near Shuwaihat in the west of the emirate. If the field proves commercially viable, the European companies will enter into a concession to produce gas. Both bring with them extensive expertise in handling sulphur-rich sour gas, which predominates in the emirate.

"What I'm keen to see encouraged is a number of smaller E&P [exploration and production] players, who made that kind of differential space their key proposition to the market place," said Mr McCallum. "On the back of those one can anchor a long term, sustainable supply chain."

Smaller players have also found their way to Kurdistan, where politics have so far prevented super majors from producing hydrocarbons, and Qatar, where Maersk is developing oil reserves and exploring gasfields. For those companies, the UAE could provide an attractive regional base.

Abu Dhabi has also welcomed a different breed of company.

In January, it agreed to let state-owned China National Petroleum Corporation explore vast tracks of its territory. A few months later, a similar agreement was signed with Korea National Oil Company.

Chinese companies serve as a good example of the UAE's pull.

"When the Chinese come to the [Arabian] Gulf, they open a regional office in Dubai or Abu Dhabi, because you have the most open environment," says Kelly Huang, an analyst at National Bank of Abu Dhabi. "If they see more business coming from Qatar, they move to Qatar."

The Abu Dhabi Company for Onshore Oil Operations' concession is up for renewal in 2014 and there is a consensus emerging in the industry that Adnoc will widen the pool of participants.

Dubai does not have the hydrocarbon resources of its neighbour but its transport infrastructure and lifestyle has been a pull for international energy companies.

This prompted Halliburton, a US oilfield services company, to establish its second global headquarter in the city in 2007.

Dubai stands to profit if recent arrivals to the region decide to follow Halliburton's footsteps.

"When you can begin to talk about international cities being attractive on an international level, you begin to compete in a global arena," said Mr McCallum.

"That has certainly been true of Dubai over the last five years, and is increasingly true for Abu Dhabi."