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Reuters: Conoco wins multi-billion UAE gas project

Thu Feb 14, 2008 11:06am
By Stanley Carvalho and Simon Webb

ABU DHABI (Reuters) – ConocoPhillips has won a contract for a project expected to cost more than $10 billion (5.07 billion pounds) to develop sour gas reserves in the United Arab Emirates, sources at state oil company ADNOC said on Thursday.

The project was one of the largest upstream projects in the past year open to international companies competing for limited access to the Middle East’s oil and gas fields.

“ConocoPhillips is the winner of the project,” said one source at state-run Abu Dhabi National Oil Company (ADNOC), who declined to be identified. “The official signing (of the contract) will take place soon.”

A second source at ADNOC also said Conoco had won the project. The company emerged as the front runner for the contract last month, beating competition from Exxon Mobil, Occidental Petroleum and Royal Dutch Shell.

Conoco was expected to take a 40 percent stake in the project, while ADNOC would hold the rest.

Sour gas requires treatment to reduce the content of sulphur or other impurities.

Developing the sour gas at the Shah field would cost at least $10 billion, an industry source said on Thursday.

Costs for the project have escalated, as they have worldwide in the energy sector as producers strain to bring new capacity online to meet rising demand.

Last year, analysts pegged the price of developing Shah and a second sour gas field called Bab at $10 billion. Now, the cost is as high for just the one field.

The UAE holds the world’s fifth-largest gas reserves at nearly 214 trillion cubic feet, much of it sour. Record oil revenues have fuelled economic expansion and rapidly rising demand for gas from both the power sector and the Gulf Arab state’s growing heavy industry.

Domestic gas supply has trailed demand, and the UAE is importing around 2 billion cubic feet per day (cfd) from Qatar to plug the gap.

As it looks to boost supply, the country is planning to develop fields that it may previously have deemed too complex and uneconomic.

The gas at Shah has a content of around 30 percent of deadly hydrogen sulphide, making it tougher to produce than conventional gas reserves.

The country’s oil minister has said it may develop the Bab field at a later date. France’s Total has said it would be interested in that field.

The UAE had initially asked companies to bid to develop both Shah and Bab, but removed Bab from the terms of a revised bid in August. The Bab field was seen as more complicated due to its proximity to inhabited areas.

(Editing by Anthony Barker)

© Reuters 2008 All rights reserved.

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