ByAndrew England in Abu Dhabi
ConocoPhillips is pulling out of a multibillion dollar joint venture to develop a gas field in Abu Dhabi, the company said on Wednesday.
Industry sources said that the US oil group made the decision because the project to develop the Shah onshore gas field with the Abu Dhabi National Oil Company (Adnoc) no longer fitted with the company’s strategy.
EDITOR’S CHOICE
The new silk road - Apr-26.Taqa set for period of retrenchment - Apr-26.Comment: UAE needs more law reform - Mar-10.Abu Dhabi names new Adia boss - Apr-14.UAE announces death of ADIA fund chief - Mar-30.Abu Dhabi learns from neighbour - Mar-29..“The Shah gas field will be a world class project that will develop a key resource for Abu Dhabi and the region, and it was a difficult decision not to participate in a project of this importance,” said Ryan Lance, Conoco senior vice-president.
Last week, Conoco announced it was withdrawing from a project to build a new 400,000 barrel a day refinery in Saudi Arabia with Saudi Aramco, the kingdom’s state oil company.
Adnoc was not immediately available for comment.
The US company signed an agreement to develop the field in 2008, after beating off competition from Royal Dutch Shell and Occidental Petroleum Corp. Adnoc held a 60 per cent stake in the joint venture, with Conoco the remaining 40 per cent. It has been estimated that the project would cost about $10bn.
The withdrawal is a significant setback for Abu Dhabi, the capital of the United Arab Emirates, as the development of the field is critical to its plans to meet soaring energy demand.
The emirate, which is home to more than 90 per cent of the UAE’s oil and gas reserves, is expected to keep the project alive because of its importance to its energy strategy. But it will now have to decide whether to develop it alone or look for a new international partner.
Shah is a sour gas field and is seen as an important test of the emirate’s ability to develop its untapped gas resources, much of which has a high content of hydrogen sulfide. This makes it highly corrosive and means it is expensive and technically challenging to develop.
The project has already suffered delays, but it was hoped that Shah would start producing gas around 2013, with a production target for sales gas of between 500m and 700m cubic feet per day.
At the beginning of 2007, the UAE had proven gas reserves of 214,000bn cu ft – the world’s fifth largest – according to the US Energy Information Administration.
But like other nations in the oil-rich Gulf, the UAE faces gas shortages as its population grows and its emirates embark on highly ambitious development plans. The UAE is already a net importer of gas, importing 2bn cu ft per day from Qatar – the only Gulf state with sufficient gas online to meet its energy needs.
The UAE is also developing a civilian nuclear programme in a bid to meet rising energy demand – which grew at between 8 and 9 per cent in Abu Dhabi even through the economic downturn.
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