Abu Dhabi has awarded an engineering and construction contract worth billions of dirhams as part of its efforts to increase production at one of the world's largest offshore oilfields.
The Zakum Development Company (Zadco) awarded the contract worth as much as Dh3 billion (US$816.7m) to France's Technip and the UAE-based National Petroleum Construction Company (NPCC).
The companies were together awarded the first of two huge deals to raise production at the Upper Zakum field -one of the key projects to raise Abu Dhabi's overall production.
"We received the letter of award on Thursday," said a Technip spokesman. Media reports put the value of the contract at Dh3bn, and the spokesman confirmed the deal was "in that order of magnitude".
Zadco, a subsidiary of the Abu Dhabi National Oil Company (Adnoc), is charged with expanding the oil production capacity of the Upper Zakum field from its current 500,000 barrels per day (bpd) to 750,000 bpd by 2016.
The project, termed UZ750, is part of the drive to increase Abu Dhabi's capacity to 3.5 million bpd from its present production of about 2.6 million bpd by 2018.
The Technip-NPCC alliance will now start with the engineering and construction of the offshore portion of the project. The work is scheduled to be completed by 2015. The companies fended off competition from the American firm J Ray McDermott and Italy's Saipem.
Bids for a second contract are expected to be submitted next month, when Technip and NPCC are due to compete again as a team. As this contract mandates the construction of the processing facilities on a set of artificially constructed islands, it represents a far bigger prize to contractors than the first contract. Technip expects the contract to be awarded by the end of the year.
The push to develop Upper Zakum is gathering force. Last month, Zadco awarded a contract to the local Habtoor Leighton Group to build the utilities and accommodation infrastructure on the islands.
Upper Zakum has been recognised as one of the world's major hydrocarbon deposits since the 1970s. It was initially seen as uncommercial because of the technical difficulties of extracting oil from the rock formation when the deposits were discovered in 1963.
Production reached its current levels only after ExxonMobil joined Zadco and committed its technology to the field in 2006.
The award of the first UZ750 package was originally due at the end of last year but was delayed because companies had to resubmit their bids to accommodate changing technical specifications, according to sources involved in the process.
The upgrading of Upper Zakum's capacity will occur in three phases. The first will boost production capacity by 100,000 bpd, and the second will add 150,000 bpd. The third phase will be aimed at ensuring production can be maintained over a 25-year period.
In a bid to achieve Abu Dhabi's overall production targets, Adnoc subsidiaries have for the past three years been awarding contracts to raise capacity at existing developments and to tap undeveloped fields. The deadline for the production rise to 3.5 million bpd has been pushed back several times since 2006.
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