Optimising output: Raising efficiency and increasing innovation are central to efforts by offshore companies to maximise production


It has been a time of sweeping changes in the boardrooms and offices of Abu Dhabi’s offshore oil businesses, but on the rigs, platforms and islands, the focus continues to be on increasing the output of oil and gas. The consolidation of Abu Dhabi Marine Operating Company (ADMA-OPCO) and Zakum Development Company (ZADCO), which was announced in October 2016, has given the combined company’s management some challenges to grapple with in 2017 as they finalise the precise details of the union.

However, the new company’s leaders will also be looking ahead to further changes and opportunities in 2018, when the concessions they manage with international oil companies are due for renewal.

Efficiency Raising

Across the Abu Dhabi National Oil Company (ADNOC) group of companies, the economic consequences of the downturn in oil prices have brought savings and efficiencies into much sharper focus. Each business has been told to regard itself as a profit centre rather than a cost centre, and with each unit measured against key performance indicators managers are under pressure to ensure they deliver positive results and reduce operational expenditure.

At ADMA-OPCO and ZADCO the emphasis is currently on ensuring that overlaps and duplication in staffing and activity are removed. That inevitably means carrying out workforce optimisation. However, the company’s management is focused on creating a healthier bottom line for the business without compromising on health and safety in the field.

Shamis Al Dhaheri, group managing-director of holding company Ali & Sons, told OBG, “Efficiency is not about reducing head count alone, but about how you make it a culture of efficiency.” This sentiment on the fostering of a culture of efficiency was echoed by Yasser AlMazrouei, CEO of ADMA-OPCO, when he told OBG, “The future price of oil is unpredictable and hence uncontrollable. But what remains well within our control is the cost of every barrel we produce. Therefore, we remain focused on making the most of our resources and enhancing our performance.”


ADNOC owns a 60% share in both ADMA-OPCO and ZADCO, and the Japanese Oil Development Company (JODCO) has a 12% share in each. The remaining shares in ADMA-OPCO are held by BP, with 14.67%, and Total, with 13.3%. Both companies have a portfolio of holdings in both onshore and offshore oil and gas in Abu Dhabi, and both recently signed new 40-year concession agreements giving them 10% of Abu Dhabi Company for Onshore Petroleum Operations’ (ADCO)’s onshore business.

However, the ADMA-OPCO concessions for BP, Total and JODCO are all due to expire in March 2018, so a primary focus of the newly merged company will be to renegotiate its shareholder agreements with all of the interested parties. The ZADCO concession, in which ExxonMobil has a 28% share alongside JODCO’s 12%, is not due to expire until 2041.

In the meantime, ADNOC says the decision to streamline the two companies has been welcomed by international shareholders, with the foreign partner companies set to benefit from the reduction in overheads achieved by combining corporate functions at the offshore businesses. In the case of JODCO, which owns shares in both companies, the consolidation should mean they are dealing with one set of staff rather than two.

Offshore Hubs

Three islands called Das, Arzanah and Zirku serve as hubs for the offshore fields that were separately managed by ADMA-OPCO and ZADCO until the consolidation. Das Island is the main industrial centre of offshore oil and gas production for ADMA-OPCO, where oil and gas produced from the Umm Shaif, Zakum, Nasr, Bunduq and TABK fields is processed, stored and exported. As a result of its strategic location in the centre of the Gulf, approximately 165 km north-west of Abu Dhabi, it is the region’s main oil storage site. Das Island is also the export terminal for oil from the offshore fields of ADMA-OPCO, and for liquefied natural gas produced by the Abu Dhabi Gas Liquefaction Company, both part of the ADNOC group.

International Partnerships

A number of small and medium-sized international firms play a role in ADNOC’s offshore development. For instance, Penspen was appointed project management consultant to ADMA-OPCO for the ongoing work on Das Island in the UAE in 2016. There are four primary areas in which Penspen will advise and lead: the upgrade or replacement of various pipeline networks; studies to be conducted on an oil spill response centre to serve Das Island and offshore; a large-scale overhaul of crude oil storage tanks; and the installation of three COL pumps and associated modification. The project management consultancy contract will run for four years. Penspen’s team of 10 will be responsible for the overall management and administration of the respective project activities on behalf of ADMA-OPCO. “Being a mid-sized company allows us to react more quickly to market conditions, which is important, as the market has become more crowded and many of our main competitors have had to downsize,” Michael Simm, vice-president of engineering firm Penspen, told OBG. “The broad question everyone is asking themselves is how can we work for less cost and fewer man hours without compromising core building blocks, such as health, safety and the environment.”

Field Developments

When the two companies combined, their assets included the five established fields at Umm Shaif, Zakum, Upper Zakum, Umm Al Dalkh and Satah and three new fields at Umm Lulu, Nasr and Satah Al Razboot (SARB). In addition, work had already begun on a significant expansion of Upper Zakum – known as UZ750 – which includes the construction of a total of four man-made islands called North, South, Central and West.

In 2015 the combined output from the five older fields was 1.29m barrels per day (bpd), but by 2018, as the three new fields and four islands come on stream, offshore capacity is set to rise to 1.59m bpd, which will contribute to the ADNOC’s plan to increase Abu Dhabi’s daily crude oil production capacity to 3.5m bpd by 2018.

In order to develop these new fields, the offshore companies, working with their international shareholders, have been using new techniques and systems, and in so doing they have reached new milestones, with the first 4m barrels produced from the new Nasr field in 2015, the same year in which drilling operations in the SARB field began using land rigs. For its part, SARB is set to come on stream by January 2018. “The full development of the three oil fields in the next few years will strengthen the long-term future of ADNOC’s mission to remain a reliable energy supplier,” AlMazrouei told OBG.

Forming Man-Made Islands

With guidance from partner ExxonMobil, workers in Upper Zakum’s extension UZ750 have taken a revolutionary approach to offshore work for the company. Faced with the challenge of achieving sustainable production totalling 750,000 bpd, the company realised they would need an additional 24 wellhead platform towers, hundreds of km of new flow lines and double the number of jack-up drilling rigs. After assessing a number of alternative approaches, however, they settled upon a different solution that involves the consolidation of drilling centres and processing facilities on artificial islands, and the use of advanced technologies – such as extended reach drilling (ERD) with Maximum Reservoir Contact – to effectively develop the entire field.

Artificial islands pose a unique set of challenges for the logistics firms entrusted with the movement of equipment and people. “The lack of space makes it very complex with different islands and different vendors,” Edward Talbot, general manager of ALE Heavylift, a logistics firm serving the oil and gas industry, told OBG. “These developments are increasingly modularised, which is both the success and the challenge. Increasingly we are looking at what else can be added offshore, and how to be more efficient particularly in areas like installation and overall constructibility.”

The use of ERD, for its part, meant Exxon could extend the measured depth of new wells from 10,000 feet to 35,000 feet. The increase in production from the new field is part of a longer-term adjustment to offshore crude production and processing. “As part of our strategy, we continue to look at increasing the refining of Upper Zakum crude, which is heavier and cheaper to process, helping improve gross margins,” Jasem Al Sayegh, CEO of Takreer, told OBG. “This frees up Murban crude for export, which is highly sought after in international markets.”

Cloud Solutions

In addition to some of the advances it is making with drilling technology and exploration, the new offshore exploration company is set to make digital advances with the data it collects from its wellheads. In November 2016 the company announced it had completed its Cloud Ready Data Centre with the Chinese company Huawei. The centre is designed to enable the processing of substantial quantities of data produced during exploration and production, while also enabling the company to fully protect the security of all its business information systems.

The development will also enable the company to combine its three existing data centres to create an integrated IT system supported by a disaster recovery centre. By monitoring and assessing the performance of its wells, it aims to increase efficiency and output. “Digital oil fields are part of a new round of innovation, allowing quick, efficient responses in managing reservoirs,” AlMazrouei told OBG. “There is a lot of smart data coming out of these wells and better management of this data allows us to optimise our downtime.” The company is rolling this technology out across its newer fields and has also announced plans to upgrade the digital equipment in its older fields.

Drilling Company

An ADNOC Group company serving the oil and gas industry both on land and at sea is the National Drilling Company (NDC). As of 2017, its fleet of 94 rigs includes 63 land rigs, 20 jack-ups and 11 island rigs. Its new drilling rigs are digitised and it is upgrading older equipment to meet new requirements.

While the aggressive expansion of drilling activities and the development of man-made islands has served to keep the company busy, at the same time it has also had to adapt the kind of equipment it is offering to the exploration companies. “We are continuously adding to our fleet with a wide range of specifications,” Abdalla Saeed Al Suwaidi, CEO of NDC, told OBG. “The key component is ensuring the fleet is diverse, flexible and able to adapt to the changing environment around us.”

In February 2017 NDC inaugurated a new jack-up rig for use. This rig, built in the UAE, was the eighth of nine to be manufactured by Lamprell for NDC, and its acquisition was part of ADNOC’s ongoing drive to utilise new technology in order to increase efficiency.

On April 27, 2017 the NDC celebrated completing the full acquisition of all nine state-of-the-art locally made offshore rigs in Sharjah – with project partner Lamprell – including the high-tech jack-up rig Al Lulu. The project was worth a total of Dh6bn ($1.6bn) and the rigs were built at Lamprell’s facilities in the UAE. All the new rigs are designed to suit the needs of Abu Dhabi and fulfil the requirements of NDC clients across the full ADNOC group of companies. “As part of optimisation efforts, the goal is to get more wells out of a single rig, which reduces costs,” Al Suwaidi told OBG. “To do this, you must utilise pad drilling or the clustering of wells, which can only be done with precision rigs that are able to move or ‘walk’ without being dismantled. All this requires different designs, but it saves billions in field development. Fields often get congested, and this is one method of allaying these concerns.”

Smaller Fields

In addition to ADMA-OPCO and ZADCO, there are also two smaller outfits in which ADNOC has a 60% share. The first of the units partly owned by ADNOC, Al Dhafra Petroleum, was established as a joint venture with Korea National Oil Corporation in December 2013. It operates both onshore and offshore, looking for new conventional and unconventional fields in remote concession areas. The second, China National Petroleum Company is employing a similar strategy in its joint venture with ADNOC, called Al Yasat Petroleum Operations Company, which has been investigating five onshore blocks and two offshore since 2012.

There are also three exploration companies which are independent from ADNOC but operate under ADNOC Health, Safety and Environment supervision. These are Abu Dhabi Oil Company (ADOC), Bunduq and Total Abu Al Bukhoosh (ABK). ADOC is a Japanese-owned oil exploration firm, established in Abu Dhabi since the late 1960s, with concessions to drill for crude in the Mubarraz oil field, due to run until 2042. ADOC has been shipping its crude oil to Japan since 1962.

Another company that is majority owned by Japanese shareholders but operating in Abu Dhabi is Bunduq. A Japanese consortium controls a total of 97% of the shares, with BP holding the remaining 3% in the company, which has been operating at a field approximately 200 km from Abu Dhabi and 100 km from Doha since 1970, with the first oil produced in 1975. Total owns a 75% stake in the ABK offshore field, which was first discovered in 1969 and began producing oil in 1974 and gas in 1992. By 2015 the field was producing a total of 150,000 barrels of oil equivalent per day.

With fields that have been producing oil for more than 40 years and substantial concessions with international oil firms extended, the offshore sector in Abu Dhabi will be continue to able to draw on decades of experience as it works to optimise its recovery rates.