Continued high gas prices in Europe in the aftermath of Russia’s invasion of Ukraine in February have prompted several major European oil and gas companies to expedite the development of gas projects in the Middle East, with Italian major Eni’s latest announcement regarding the UAE being the latest example.
According to comments from the company, its chief executive officer, Claudio Descalzi, met last week with his counterpart from the Abu Dhabi National Oil Company (ADNOC), Sultan al-Jaber, in Abu Dhabi, to discuss speeding up the development of the Ghasha sour gas project, and the Offshore Block 2 project. The Ghasha concession is the world’s largest offshore sour gas development, comprising not just the Ghasha field itself but also the Hail, Hair Dalma, Satah, Bu Haseer, Nasr, SARB, Shuwaihat, and Mubarraz fields as well. First production from it had been expected to begin in 2025, with the target being the production of at least 1.5 billion cubic feet per day (bcf/d) of gas by 2030. Eni is the holder of the largest foreign share of the ADNOC-led project, with a 25 percent stake, followed by Germany’s Wintershall Dea (10 percent), Austria’s OMV (5 percent), and Russia’s Lukoil (5 percent). ADNOC’s al-Jaber confirmed recently that: “ADNOC is committed to unlocking the UAE’s abundant natural gas reserves to enable domestic gas self-sufficiency, industrial growth and diversification, as well as to meet growing global gas demand.”
The Ghasha concession was one of the key projects that was part of the US$2 billion of drilling contracts handed out recently by ADNOC as part of the UAE’s plans to help OPEC’s third-biggest producer achieve gas self-sufficiency, and after that to look to exporting the surplus. Becoming self-sufficient in gas is part of the UAE’s broader ‘Operation 300 Billion’ plan that intends to raise the contribution of the country’s industrial sector to AED300 billion (US$81 billion) from the current AED133 billion within the next 10 years. This objective, in turn, is part of the UAE’s Circular Economy Policy 2021-2031, and will be achieved in large part through the creation of 13,500 industrial companies over that period, covering the manufacturing, construction, electricity, gas, mining and quarrying sectors in the first instance. All of this aligns with the ADNOC’s broader plans to expand its hydrocarbons (and low-carbon) businesses, for which it has announced spending plans of $127 billion between this year and the end of 2026.
Self-sufficiency in gas will also allow the UAE to build out a strategic petrochemicals sector and to avoid being reliant on Qatar for the gas that it requires for its electricity grid. This drive towards self-sufficiency in the gas sector was energised after the huge shallow gas field discovery made in 2020 in Jebel Ali, which, according to statements from the companies developing the site – ADNOC, and the Dubai Supply Authority – holds around 80 trillion cubic feet of gas across a 5,000 square kilometre area between Abu Dhabi and Dubai. Following this, the hunt for further sizeable gas deposits picked up pace, and not just in the vicinity of the previous discoveries. Last year, ADNOC announced an increase in national reserves of 16 trillion cubic feet (tcf) of gas, bringing the UAE’s gas reserves to 289 tcf.
Another of the UAE’s constituent emirates, Sharjah, also recently announced proposals to launch an offshore bidding round for its new gas and condensate find in Block B. Eni has a 50 percent in this area too, with the other half being held by the state-owned Sharjah National Oil Corp (SNOC), and it is here that the Italian company discovered the Mahani reservoir. According to initial reports from Eni, the first drilled well in Mahani achieved flow rates of up to 50 million standard cubic feet per day (mmcf/d) of lean gas and associated condensate. SNOC is currently limiting the production from Mahani-1 gas well at less than 50 mmcf/d in order to collect data and delineate the reservoir, according to the state-owned company’s chief executive officer, Hatem al-Mosa. He added: “The seismic [of the exploration prospect] shows that it is significant [and], if it is as per the seismic, it will be very economical to produce and develop.” Eni and SNOC are also partners in the onshore concession areas A and C, where exploration is actively in progress, with Eni being the operator.
Offshore Block 2, the second of the major projects earmarked for fast-tracking last week, also features Eni as the major shareholder, with a 70 percent stake (the remainder being held by Thailand’s PTTEP). The end of July saw the discovery of a new, deeper reservoir that indicated 1.0-1.5 tcf of raw gas, almost doubling the discovered field volume, according to a comment from ADNOC at the time. The July discovery followed the one made in February from a shallower target, and takes the total potential gas discovered from Block 2 to 2.5-3.5 tcf. Eni also operates in other offshore areas of Abu Dhabi and Ras Al Khaimah, another UAE emirate.
Eni’s efforts in the UAE will complement those of other major European oil and gas firms in recent months, most notably France’s TotalEnergies, which recently signed a partnership agreement with ADNOC that includes cooperation in trading, product supply and carbon capture, utilisation and storage. As highlighted and analysed by OilPrice.com recently, TotalEnergies is at the vanguard of France’s policy of attempting to reduce its own dependence on Russian energy imports by expanding and expediting the development of alternative energy supplies, particularly in the Middle East. As TotalEnergies stated at the time of the signing of the partnership agreement with ADNOC: “[The agreement includes] the development of oil and gas projects in the UAE to ensure sustainable energy supply to the markets and contribute to global energy security.”
This, in turn, followed the signing of the UAE-France Comprehensive Strategic Energy Partnership, which also focuses on securing energy supply for France going forward. Such concerns about the negative effects for France resulting from the staggered bans on Russian energy ahead were echoed again earlier in July by France’s economy minister, Bruno Le Maire, who said: “Let’s prepare for a total cut-off of Russian gas; today that is the most likely option.” Although France receives slightly less than 20 percent of its gas imports from Russia – much less than several other European Union (EU) states – its liquefied natural gas (LNG) imports fell by nearly 60 percent month-on-month (m-o-m) in June, to around 1.06 million metric tonnes, according to industry data.
In addition to the new elements delineated in the partnership agreement, TotalEnergies has several major gas projects in development in the UAE. Its 40 percent stake in the Ruwais Diyab unconventional gas concession has an output target of 1 bcf/d by 2030 and saw first production in 2020. The French company also has a 15 percent stake in ADNOC Gas Processing, which produces natural gas liquids and condensate from the associated gas produced by ADNOC Onshore, and a 5 percent stake in ADNOC LNG (liquefied natural gas).
Thu, 09/22/2022 – 06:30
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Author: Tyler Durden