Major regional and global developments leading to improvements in Abu Dhabi's energy sector

While Abu Dhabi continues to diversify its economy, oil and gas nevertheless remain the emirate’s mainstays, representing more than half of GDP in 2015 and accounting for more than 90% of government revenues, according to figures from the Statistics Centre - Abu Dhabi (SCAD). Despite the impact of low oil prices on the sector, the government remains committed to expanding production and has targeted a new plateau of 3.5m barrels per day (bpd) within the next two years. In order to meet that goal, significant investments are being made in new fields and production techniques, with a growing domestic focus on research and development in the hope of seeing improved recovery rates at existing fields.

Meanwhile, a pressing need for additional gas is similarly seeing Abu Dhabi’s producers tackle some challenging new plays, with production at the sulphur-rich Shah field hitting full capacity in October 2015 and additional sour gas resources set for future development. On the retail side, the UAE is also taking major steps to decouple itself from regional trends, with July 2015 seeing the country become the first in the Gulf to end public subsidies at the pump.

In Figures

According to figures from SCAD, in 2014 the mining and quarrying sector, including oil and gas, contributed Dh485.7bn ($132.2bn) to Abu Dhabi’s GDP when measured at current prices. This sum was equivalent to around 51% of that year’s total GDP of Dh952.7bn ($259.3bn). In absolute terms Abu Dhabi’s oil sector declined by 5% in 2014 compared with the previous year, owing largely to a steady fall in oil prices that began in the second half of that year.

As a result, and because non-oil GDP continued to grow, the share of GDP represented by oil fell by 3.9 percentage points, having been 54.9% in 2013. Given that the fall in oil prices carried over into 2015, it is likely that GDP figures in 2016 will see an even more pronounced decline in the share of oil. Gross fixed capital formation (GFCF) in the oil and gas sector rose very slightly in 2014, by 1.1%, to reach Dh27.9bn ($7.6bn). Compared with 2010 figures, however, GFCF in the sector is significantly down, having fallen by 17.2% from recent highs of Dh33.7bn ($9.2bn).

As a result, 2014 saw the real estate sector overtake oil and gas for the first time as the most significant concentration of capital in Abu Dhabi, reaching Dh31.8bn ($8.7bn), or 20.7% of the total, against 18.2% for oil. Despite its significant size, the oil and gas sector accounts for just 3.7% of total employment in the emirate. Among nationals, however, it is a significant source of work, accounting for 9.1% of total employment. On the revenue side, in 2014 petroleum royalties and tax revenues accounted for 91% of Abu Dhabi government income.

While SCAD statistics do not provide absolute figures for revenue, the agency nonetheless indicated that overall revenues were down 12.9% compared with 2013, owing to the decline in oil prices. As with figures for the absolute share of oil and gas in the emirate’s GDP, the sector’s share in government revenues is likely to decline yet further in 2015.


According to OPEC figures, total UAE production, which includes that from Abu Dhabi, was an average of 2.8m bpd in 2014. Of this, domestic demand accounted for 719,000 bpd, according to OPEC, while crude oil exports accounted for around 2m bpd, according to SCAD figures. The SCAD statistical yearbook also reported that Abu Dhabi’s oil exports declined by 28.3% in volume year-on-year (y-o-y), reaching 729.1m barrels in 2014 compared with 1.02bn barrels in 2013.

Much of this decline in crude exports, though, appears to have been covered by an increase in the production and export of value-added refined products: in 2013 Abu Dhabi exported just over 10m tonnes of refined petroleum products, while the following year this figure more than tripled to 36.3m tonnes. Key export markets for Abu Dhabi crude are all east of the Suez Canal. The single most prevalent destination is Japan, which in 2014 accounted for almost a third of all crude oil exports, with a total of 231.6m barrels. This figure was actually down 37.5% y-o-y, with 2013 demand from Japan having totalled 370.8m barrels, representing a 36.5% share of the total for that year. Indeed, demand declined substantially across the top eight customers for Abu Dhabi crude during 2014, giving some indication of the trends lying behind the precipitate fall in global oil prices. South Korea, India, Thailand, Singapore, China, Pakistan and Taiwan all saw demand for Abu Dhabi crude decline, while by contrast Sri Lanka, the US, South Africa and France all opened accounts in light of the falling oil price, with exports to these countries rising from zero in 2013 to several million barrels in 2014, and hence making up for some of the loss in Asian markets.

New Customers

While the market for Abu Dhabi’s crude oil is mostly located in East and South-east Asia, the growing market for its refined products is more diverse. As of 2014 the number one destination for such exports is the Netherlands, which absorbed 9.2m tonnes, or over a quarter of refined exports. Alongside the Netherlands, France, Japan, India and Saudi Arabia rounded out the top five. When it comes to liquefied natural gas (LNG) exports, however, the situation is closer to crude: as of 2014 Abu Dhabi exported LNG to only three countries – Japan, South Korea and India, with the lion’s share, 97.8%, going to Japan. LNG exports in fact declined by 15.6% in terms of value in 2014 to reach Dh16.9bn ($4.6bn), as growing domestic demand for gas placed pressure on the emirate’s export capacity.

Alongside declining volumes for crude, as already mentioned, Abu Dhabi has also had to deal with significantly lower prices. The principal benchmark for the Gulf region, the Dubai Mercantile Exchange’s Full Curve OQD, was trading at over $100 per barrel as recently as early June 2014. By the end of the year, however, it had fallen to as low as $55 per barrel, and in January 2015 Abu Dhabi’s main grade, Murban, had fallen with it to a six-year low of $46.40.

Although prices recovered marginally in the middle of 2015, by November 2015 the OQD was again regularly dipping below $50, although with the futures market in contango, which is when the futures price of a commodity is higher than the expected spot price, it would appear that traders are nonetheless anticipating a growth in demand in 2016 that may push prices back up somewhat.


 Sovereignty over oil and gas wealth remains vested in the individual emirates that make up the UAE. As a result, since 1988 oversight of the sector in Abu Dhabi has fallen under the responsibility of the Abu Dhabi government’s Supreme Petroleum Council (SPC), which formulates and oversees the implementation of the emirate’s petroleum policy across all areas of the industry. The SPC is chaired by Abu Dhabi’s ruler, President Sheikh Khalifa bin Zayed Al Nahyan. In February 2016 the Abu Dhabi Executive Council appointed Sheikh Abdullah bin Mohammed Al Hamed as CEO of the Energy Authority, the remit of which is still unknown.

Until 2011, when the roles were split, the secretary-general of the SPC had always also been director general of Abu Dhabi National Oil Company (ADNOC). This company was established in 1971 as a state-owned vehicle to increase the rate of national participation and ownership in the then-burgeoning oil sector. ADNOC quickly established majority ownership of the pre-existing operating companies (OPCOs) in the emirate and now typically holds at minimum a 60% share in these and more recently established OPCOs. Altogether, ADNOC either wholly owns or holds a majority share in 16 subsidiaries, covering a full range of operations and services related to the oil and gas sector, according to the Abu Dhabi government’s e-government gateway. The current CEO of ADNOC is Sultan Al Jaber, who was appointed to the position in early 2016.

On the crude oil production side, ADNOC’s principal subsidiaries are the Abu Dhabi Company for Onshore Petroleum Operations (ADCO) and two offshore OPCOs, the Abu Dhabi Marine Operating Company (ADMA-OPCO) and the Zakum Development Company (ZADCO). Though established in 1978, ADCO’s roots date right back to the early beginnings of the Abu Dhabi oil industry in 1939, when the initial concessions for onshore exploration and production were signed with a conglomerate of international oil companies (IOCs) comprising the Iraq Petroleum Company: Exxon-Mobil, Royal Dutch Shell, Total and BP. Indeed, that initial concession agreement only expired in 2014, though by then the IOCs’ holdings had been reduced to a total of 40%.

By contrast, Abu Dhabi’s offshore sector dates back to the 1960s, when BP began exploiting the Umm Shaif field under the ADMA concession. Since then, both Total and Japan Oil Development Company (JODCO) have joined the operation, while, similar to the onshore sector, ADNOC acquired a 60% holding in 1974. The ADMA-OPCO name dates back to 1977 and the current concessions for the company are set to expire in March 2018. Alongside ADMA-OPCO, ZADCO was established in 1977 to develop the Upper Zakum offshore reservoir. ZADCO is a partnership between ADNOC (60%), Exxon-Mobil (28%) and JODCO (12%), and concessions are not set to expire until 2041.

Legal Framework

Under Article 23 of the UAE Federal Constitution, natural resource wealth remains the public property of the individual emirates. Hence, regulation of the sector falls under the domain of each emirate, rather than the federal government, with the exception of environmental responsibility, which is federally regulated through Federal Law No. 24 of 1999. Within Abu Dhabi, the legal framework for the oil sector is not governed by a single law, but rather a number of laws and decrees, including the Tax Decree of 1965 (as amended), Law 7/1971 ( establishing ADNOC) and Law 1/1988, which established the SPC. The gas sector is regulated by Law 4/1976, which reserves the ownership of all natural gas in the emirate to Abu Dhabi alone and which establishes the exclusive right of ADNOC to exploit such resources, with joint agreements requiring a minimum ADNOC participation of 51%. The conservation of petroleum resources and the regulation of petroleum ports are covered by Law 8/1978 and Law 2/1973, respectively.

Within this legal framework there is significant room for flexibility when it comes to the negotiation of lease and concession agreements, including royalty and taxation terms. Concession agreements in Abu Dhabi have been granted to ADNOC in exclusivity, to ADNOC in consortium with IOCs and to project companies, which typically also include ADNOC’s participation as a shareholder, but which in very rare cases do not, as with the Abu Al Bukhoosh offshore project. Within these forms of participation, the precise terms of the concession agreement, unless specifically granted by law, are usually considered a private arrangement, and hence not publicly available. A common structure for regulating IOC participation in joint ventures comes in the form of a production-sharing agreement (PSA).

Historically, earnings through PSAs in Abu Dhabi have been comparatively low at around $1 per barrel; however, the advantage to IOCs of these agreements tended to lie in the ease of extraction of Abu Dhabi’s oil and the bookable reserves that equity participation entails. In terms of the fiscal environment, the Abu Dhabi Tax Decree generally stipulates a specific level of taxation on income, including a 55% corporate tax. However, production companies are usually supplied with an additional fiscal letter from the SPC that typically entails an income tax of between 55% and 85%, depending on production levels.

With the expiry of ADCO’s initial concession agreements in January 2014 and further concessions for ADMA-OPCO due to expire within two years, there is some indication that the general framework for concessions within Abu Dhabi is undergoing modification. A number of Abu Dhabi’s largest onshore reservoirs are entering the mature phase of production, which will gradually necessitate the use of proven new technologies such as enhanced oil recovery (EOR) techniques to raise recovery rates. The new ADCO concession agreements signed with Total, Inpex and GS Energy (see analysis) appear to reflect these altered operating conditions, with IOCs expected to make greater use of proprietary technologies such as the EOR. The new concept of appointing “asset leaders” to certain fields is one way of introducing the improvements, with an apparently enhanced bonus structure for obtaining better recovery.


Abu Dhabi holds 94% of the UAE’s oil reserves. According to the “BP Statistical Review of World Energy 2015”, as of the end of 2014 the UAE had proven oil reserves of 97.8bn barrels, equivalent to 5.8% of the world total, and placing the UAE eighth globally in terms of oil wealth. Should the Abu Dhabi government achieve its goal of increasing average daily output to 3.5m bpd by 2018, as reported by Abu Dhabi-based English-language daily The National in April 2015, the emirate’s reserves-to-production ratio would be just under 72 years. Although exploration for oil continues in the emirate, it is considered a relatively mature province and future new developments are expected to focus on more complex plays.

In particular, a recent focus on EOR techniques has enabled Abu Dhabi to almost double its proved reserves over the past decade, mainly through improving the anticipated recovery rate at existing fields. Abdulkarim Al Mazmi, president and general manager for BP UAE, told OBG, “Extracting oil is not as easy as it once was. It requires technologies such as the application of EOR to squeeze more oil from existing resources in order to increase production and achieve 70% recovery rates from oilfields, which is the stated goal of ADNOC.”

Local Specialty

Abu Dhabi produces crude of varying quality from several different streams. Its primary grade is Murban, a light, sweet crude with a gravity of 40.2 degrees and a sulphur content of 0.79%, which is the emirate’s primary export stream. Murban is produced from the Bab field, the largest onshore asset in Abu Dhabi, which is located some 150 km south-west of Abu Dhabi City and managed by ADCO. Another important grade is Upper Zakum, which is produced from the ZADCO-managed offshore field of the same name. It has a gravity of 34.4 degrees and sulphur content of 1.7%, and has been used by industry news provider Platts as one of the three Gulf grades that comprise the formula of its Middle East benchmark (the others being Dubai and Oman). The benchmark is used to determine the price for almost 30m bpd in oil exports to Asia.

As of late 2015, Platts announced it was considering also adding Murban and Qatar’s Al Shaheen to the benchmark, which would add a further 600,000 bpd of traded volume, The National reported. The move comes in light of expected competition from a new crude futures contract to be established soon on the Shanghai International Energy Exchange, according to an October 2015 report from Bloomberg.

As of mid-2014, a further blend of crude was added to the Abu Dhabi roster, with the introduction of the Das crude grade. Das combines the pre-existing Lower Zakum and Umm Shaif streams – both managed by ADMA-OPCO – and comes as ADMA-OPCO looks to expand both its production capacity and its exports through the Das Island processing and storage facility. The unified blend, which is also light and sweet, has a gravity of 39.2 degrees and sulphur content of 1.3%. By unifying the blend ADNOC has been able to reduce delivery time at port and increase capacity to 765,000 bpd.

Bearing Fruit

In terms of key producing fields, in the onshore sector ADCO divides its operations into four assets. Of these, Bab is the oldest producing field and it accounts for about 25% of ADCO’s production. The company’s largest is Bu Hasa/Huwaila/Bida Al Qemzan, which accounts for 35% of ADCO’s production capacity. The second largest is called South East Asset, which includes the producing fields of Asab, Sahil, Shah and Qusahwaira and accounts for around 33% of ADCO’s daily production capacity. The smallest asset is North East Bab (NEB), which includes the current producing fields of Al Dabb’iya, Rumaitha and Shanayel, and it accounts for 7% production capacity.

Meanwhile, Abu Dhabi’s offshore sector is dominated by the Zakum formation, which is the world’s fourth-largest oilfield and the second-largest offshore field. Zakum is divided into two major concessions, the Upper Zakum field, which is managed by ZADCO, and Lower Zakum, managed by ADMA-OPCO. Alongside Lower Zakum, ADMA-OPCO also has significant assets at the Umm Shaif field, which was the first offshore field to be developed in Abu Dhabi.

Both ZADCO and ADMA-OPCO are investing significant sums in expanding production from existing fields and bringing new fields on-line. The $10bn UZ750 project, for instance, aims to increase daily production at Upper Zakum to 750,000 bpd by 2017, while ADMA-OPCO is investing in the Satah Al Rasboot (SARB), Umm Al Lulu, Nasr and Lower Zakum fields. The combined additional production from these investments is expected to bring offshore oil in Abu Dhabi to 50% of the total in the next two years, as ADNOC looks to invest a total of $35bn in the offshore sector, international media reported in late 2015.

Perhaps the largest question mark currently hanging over the upstream sector is the future of the remaining participation in ADCO’s new concession agreement. As of 2015, a total of 18% out of the 40% assigned to IOCs had been awarded, with France’s Total taking 10%, Japan’s Inpex 5% and GS Energy of South Korea with 3%. While one of the frontrunners for the remaining 22% would appear to be former concession holder BP – Shell announced in January 2016 that it would be withdrawing from the Bab sour gas project – it is also thought that PetroChina and the Korea National Oil Company remain in the running for smaller stakes (see analysis).

Indeed, China’s involvement in the upstream sector has been growing in recent years, with the China National Petroleum Corporation striking a deal in 2014 with ADNOC on a new joint venture called Al Yasat, which will be involved in exploration.


Abu Dhabi’s downstream sector is dominated by ADNOC subsidiaries Abu Dhabi Oil Refining Company (Takreer), which is responsible for refined petroleum products, and Abu Dhabi Polymers Company (Borouge), which produces plastics. Takreer was established in 1999 as a wholly owned subsidiary of ADNOC that would take over responsibility for refining operations from the parent company.

Takreer has three refineries, one located near Abu Dhabi City and two at Ruwais in the Al Gharbia region. Together they have a combined output of over 44m tonnes per annum (tpa) of petroleum products. As of 2015 the Abu Dhabi Refinery had a processing capacity of 85,000 bpd of crude oil, while the Ruwais-East and Ruwais-West refineries had a capacity of 400,000 bpd and 417,000 bpd, respectively. The Oil & Gas

Making Changes

Indeed, as of March 2015 ADNOC began trimming exports of Murban grade crude to Asia to divert the production to the Ruwais refinery. In particular, the new additions to the east refinery operation will expand the production of Group II and Group III base oils by 500,000 tpa. The expanded refinery also includes the world’s largest residue fluidised catalytic cracker, while in a separate project, Takreer will attempt to convert all heavy oil produced by its refineries to lighter petroleum fractions, as well as anode-quality coke for the local aluminium smelters and carbon black for Borouge use.

Speaking to OBG, Jasem Ali Al Sayegh, CEO of Takreer, said the recent addition of global refining capacity had led to downward pressure on profit margins in the sector. “In an over-supplied market with razor-thin margins, IOCs are investing heavily in ramping up their capacity to produce more premium products,” he told OBG. “These include products with higher crack spreads such as ultra-low sulphur diesel, which has sulphur content as low as 10 parts per million. In terms of our own product diversification, Takreer is developing more value-added products with greater margins, including propylene and base oils for lubricants with higher viscosity. Most of this is being driven by a greater emphasis on environmentally sound products.”

The Ruwais project will help satisfy demand for high-quality petroleum products in local markets, as well as secure ADNOC’s presence in international markets for refined products. The plant will export 1.1m tpa of propylene to the Borouge complex, leading to reduced investment and operating costs for both companies. The project is set to increase Takreer’s refining capacity of crude oil by 417,000 bpd and almost double production of transport fuels. Al Sayegh said, “Takreer and Borouge integrated [their] expansion plans, from the design phase of both our Ruwais refinery and our partner’s Borough III polyolefin complex expansion. This joint effort maximises the benefits of having Abu Dhabi’s largest petrochemicals and refining plants next to one another.”

The absorption of some of Abu Dhabi’s additional crude production in value-added downstream production is a calculated move in light of the current oil price climate. With crude oil production expected to hit 3.5m bpd within two years and demand from Abu Dhabi’s primary Asian markets still weak, simply over-supplying the export market would be a poor allocation of capital. Al Sayegh told OBG, “Gasoline and diesel prices, which were long dependent on demand in developed nations, now fluctuate with the developing world’s rising thirst for crude oil and fuels. However, demand growth from developing nations, especially China has slowed down over the last couple of years.” By contrast, diversification into refined petroleum and petrochemicals not only increases the extent of the hydrocarbons value chain kept within country, but also assists Abu Dhabi in its economic diversification strategy, in line with the Abu Dhabi Economic Vision 2030. To this end, the latest expansion plan for Borouge – a joint venture between ADNOC and Austria’s OMV subsidiary Borealis – will see production of polyolefins increase from 2m tpa to 4.5m tpa by 2016.


Alongside its substantial oil reserves, the UAE is also home to the world’s seventh-largest reserves of natural gas, according to BP’s 2015 report, estimated at 215trn standard cu feet (scf), with Abu Dhabi again holding the majority of resources. The gas sector in Abu Dhabi is dominated by two ADNOC subsidiaries: The Abu Dhabi Gas Liquefaction Company (ADGAS) and Abu Dhabi Gas Industries (GASCO). ADGAS was established in 1973 as one of the first commercial LNG exporters in the world, and by the mid-1990s it had three trains on its Das Island facility that processed and liquefied gas from Abu Dhabi’s offshore fields for export to Japan. More recently ADGAS has been involved in the Offshore Associated Gas project on Das Island and the Integrated Gas Development (IGD) facility, commissioned in 2010 and 2013, respectively. These enabled the Das Island facility to export gas to the onshore Habshan complex through a 30-inch subsea pipeline. Once at Habshan the offshore gas is further processed to reach sales gas quality, increasing the supply of natural gas for domestic use. ADGAS currently processes around 2bn scf per day, having doubled its production capacity in recent years.

GASCO was established in 1978 and is involved in the processing and distribution of natural gas and natural gas liquids (NGLs), including sales gas and longer-chain gases. The company uses a 2150-km pipeline distribution network, which is currently in the process of being extended by 800 km, and also ships products to export markets such as China, Japan and India. Its main processing plants are the Habshan facilities (Habshan 5 and the Habshan-Bab Gas Complex), which receive gas from onshore and offshore sources, and produce network and sales gases alongside NGLs, liquid sulphur and granulated sulphur. Other plants include two at Asab, one at Buhasa and a fractionation plant at Ruwais.

Adding Value

Alongside supplying the domestic network for power generation and water desalination, many of GASCO’s products are used in Abu Dhabi’s downstream hydrocarbons value chain, with off-takers including ADNOC’s petrochemical subsidiaries Borouge and Takreer.

GASCO’s daily production includes: 4bn scf of sales gas; 215,000 barrels of condensate; 10,000 tonnes of ethane; 32,000 tonnes of propane, butane and paraffinic naphtha; and 5800 tonnes of sulphur.

While production from ADGAS and GASCO has contributed to make Abu Dhabi a leading player in global petrochemicals, domestic demand for natural gas continues to rise, and the emirate has indeed become a net importer in recent years. As a result, ADNOC has begun to invest substantial sums in new production from the emirate’s high sulphur – or sour – gas deposits. The Abu Dhabi Gas Development Company (Al Hosn Gas), a 60:40 joint venture between ADNOC and Houston-based Occidental Petroleum Corporation, was established in 2011 to exploit the Arab A, B, C and D sour gas reservoirs in the Shah field. Production from the Shah gas field commenced in January 2015, and by the end of the year Al Hosn Gas was producing all products at design capacity, including sales gas of 500m scf. The Shah field was initially discovered in the 1960s, but has only recently become technically feasible to develop. Saif Alghefli, CEO of Al Hosn Gas, told OBG that the scale of the Shah Gas Development is larger than any other sour gas project undertaken in the world and entailed constructing the world’s first single gas plant capable of processing at least 1bn scf per day of gas with a hydrogen sulphide concentration of 23%. “The challenges were many,” Alghefli told OBG. “On the upstream side, there were the difficult reservoir conditions, with high underground temperature and pressure, as well as the design of wells, the selection of materials, the type of rigs needed, equipment and procedures for testing wells, and the metallurgy to be used for transporting sour gas to the plant.” He added, “On the midstream side, we had to pay special attention to the design of the processing plant, gas sweetening and sulphur recovery processes; metallurgy and equipment; layout and spacing of the gas plant; segregation of sour gas and sweet gas; and construction of the sulphur granulation and rail car loading station – while at the same time ensuring that the lifecycle of the infrastructure and facilities will last at least 30 years, similar to a conventional gas plant.”

Exploitation of Abu Dhabi’s sour gas reserves is likely to play an increasingly fundamental role in the future of domestic gas production (see analysis), though other fields are also under evaluation, with The National reporting in February 2015 that Occidental signed a technical support agreement with ADNOC to analyse the Hail and Ghasha fields. ADNOC and Occidental, in a 70:30 venture, may spend up to $500m on appraising the fields, with Ghasha in particular one of the few remaining untapped sources of offshore gas in the emirate.


The retail side of Abu Dhabi’s oil sector is handled by ADNOC subsidiary ADNOC Distribution. The sector was substantially shaken up in 2015 with the deregulation of fuel prices across the UAE, which will now shadow global averages in an effort to eliminate subsidies (see analysis). The federal move resulted in ADNOC Distribution announcing it expected to turn a profit for 2016 for the first time in over a decade, having broken even in 2015 on the back of the reduction in subsidies, according to a Gulf News November 2015 report. As a result of the more profitable operating environment, ADNOC Distribution expects to invest Dh1.5bn ($408.3m) in increasing its total number of service stations through to 2017, up from the current level of 390. The company has been engaged in an expansion strategy across the UAE in recent years, as it acquired pumping stations from UAE federal government-owned Emirates General Petroleum Corporation and Dubai government-owned Emirates National Oil Company (ENOC).

As of late 2015 ADNOC Distribution was working on the second phase of its acquisition of Emarat Petrol, which is expected to entail the rebranding of several stations in Dubai during 2016. In the UAE overall the company will add 125 new stations, and in Dubai it will take over 59 Emarat stations. ADNOC Distribution has also started refurbishing 25 non-operational service stations in Sharjah that were transferred from fuel retailer ENOC. Beyond the automotive fuel sector, ADNOC Distribution is also investing significant sums in the new Midfield Terminal expansion project at Abu Dhabi International Airport, with a Dh750m ($204.2m) investment plan to build a new 100m-litre fuel terminal expected to be ready by the second half of 2016. The firm is also working on a final agreement with the Dubai Municipality to establish a new marine station at Al Hamriyah Port in Dubai, for which the primary design has already been developed and is expected to be completed by the fourth quarter of 2017.

There has also been a shift towards encouraging consumers to use alternative fuels. Al Sayegh told OBG, “Demand for ultra-low sulphur diesel is expected to rise sharply in the coming years as countries all over the world try to reduce particulate emissions from diesel engines.”

ADNOC Distribution has also made progress in terms of the use of compressed natural gas (CNG) as an alternative fuel. By 2020 the company plans to have a total of 70 stations that offer CNG, and to this end a pilot project with Emirate Transport to convert heavy-duty diesel vehicles to dual-fuel usage has already been launched. In terms of infrastructure, the company is currently operating a gas grid of around 45 km and a CNG-filling network of 22 stations that provide service to over 1700 residential customers, 79 commercial clients and 3600 CNG vehicles. In addition, the company has not only been able to maintain competitive prices in the face of recent changes to fuel subsidies, but even expects the new policy to improve their performance.

Abdulla Salem Al Dhaheri, CEO of ADNOC Distribution, told OBG, “The new direction of deregulating the prices will allow ADNOC Distribution to leverage its expansion plans to meet the rising demand for petroleum and allied products, in line with the sustained urban growth the UAE is witnessing across all regions. The decision will also in the long term allow us to enhance the quality of our products and services, and deliver an improved customer experience via our service centres.”

EPC Contracts

With Abu Dhabi looking both to increase crude oil production to 3.5m bpd in the next two years and also expand gas production, the emirate has continued to provide a strong market for engineering, procurement and construction (EPC) tenders. Foremost among these recent developments has been the offshore sector, with ADMA-OPCO in particular signing a number of large contracts in the past two years to advance work on its artificial islands and super complexes for the Umm Lulu, Nasr and SARB projects, as well as for the expansion of the Umm Shaif gas complex.

In June 2013 the company signed a Dh2.8bn ($762.2m) EPC deal with the National Petroleum Construction Company (NPCC) to expand production at Umm Lulu. This was followed in November 2014 by a major $3bn EPC contract to develop the Nasr field. The Nasr contract was divided into three packages, with the first being a $792m contract awarded to NPCC to construct seven wellhead towers, lay infield pipelines of 110 km, an excess gas pipeline of 32 km and a main export oil line of 70 km. The second and largest package of $1.9bn was awarded to Hyundai Heavy Industries and entails the construction of the Nasr Super Complex. The final package, a $206m contract with Technip, covered project management consultancy. Final commissioning for all packages is expected to be ready by the second quarter of 2019.

In February 2015 ADGAS and GASCO followed with a $1.6bn three-stage expansion contract of their own. The sum involved turnkey contracts for three packages of the Integrated Gas Development-Expansion project, which includes the Das Island facilities, an offshore pipeline and an onshore pipeline, combined with modifications to the Habshan facility. The first package was awarded to a consortium led by Italy’s Maire Tecnimont; the second to NPCC; and the third to Tecnicas Reunidas of Spain.

The final significant EPC contract was also awarded in 2015 and consisted of a $344m contract to develop the Mender onshore oilfield, which was awarded to the China Petroleum Engineering and Construction Corporation by ADCO in May 2015. The field, which is part of ADCO’s South East Asset, is expected to have a production capacity of 20,000 bpd.

As of December 2015 ADCO was continuing to review bids for its huge $3bn EPC tender to expand production at the Bab field by nearly 10% to 450,000 bpd. The project, known by the name of Bab Integrated Facilities, is set to be one of the largest EPC contracts in the sector in recent years.

Other Factors

While new investments continue to be made in the emirate’s oil and gas sector, it is also true that the delivery horizon for some projects has been extended in light of the falling oil price, while ADNOC has announced that it intends to cut operating costs by 25%, according to a November 2015 report from The National.

Intecsa Industrial is a Spanish EPC company involved in several projects in the Abu Dhabi oil and gas sector. One of these is the naturally occurring radioactive material waste disposal facility in Ruwais, which upon completion in June 2017 will be the most comprehensive of its kind in the world. “It works by disposing radioactive material generated during drilling operations in the emirate’s oil and gas fields,” José Carlos Gil, executive director of Intecsa, told OBG, “The process is highly complex and involves sorting the materials, together with a dry-flue gas treatment system to remove excessive sulphur dioxide.”

Gil sees the current environment as challenging. “The price of oil, of course, means that there is less money to spend. Everyone is reducing their expenses, and there are lots of EPCs losing money at this time,” Gil said. However, Gil also sees some silver lining. “On the upstream side there is still a lot of EPC activity, with a lot of business coming from the offshore companies and involving engineering in the most basic processes,” Gil told OBG.

However, others have suggested that making investments now will ensure long-term benefits, rather than spending cuts. Hussein Fouad El Ghazzawy, general manager and vice-president of Schlumberger UAE, told OBG, “Some people say that reducing costs and holding off investments at the current time conflicts with the overall mandate for increased production; however, investing now in new technologies will pay dividends in the long run.”


While the sector continues to invest and expand, Abu Dhabi’s authorities remain keen to increase the number of nationals involved at all stages of the hydrocarbons value chain. The National reported in early 2014 that the current ADNOC target for Emiratisation within the oil and gas sector is 75% by 2017 – an ambitious goal given that as recently as 2010 national participation was 18%, according to a report from the Abu Dhabi Tawteen Council, which nonetheless still made the sector the leading field for Emiratisation in the private sector. Indeed, one of the critical challenges facing recruiters is the perception that government employment offers a more secure, better-paid career path.

A study released in March 2013 by online recruitment firm GulfTalent revealed that 86% of Emirati male graduates and 66% of females preferred to work in the public sector after graduation. Abdul Munim Saif Al Kindy, CEO of ADCO, told OBG, “With an objective of 75% Emiratisation, the local pool of talent will be strained, and that is why it is so imperative that we continue to encourage young students to enter mathematics and science programmes, so that we can produce highly qualified engineers in the future.”

One of the key institutions looking to change this perception is the Petroleum Institute (PI), a university-level training and research centre funded by ADNOC, which since 2001 has been providing education in the technical aspects relating to the sector to a mostly national student base. PI currently has around 1800 students, and as of early 2016 it will include the PI Research Centre, which is devoted to addressing the most pressing technical challenges facing the Abu Dhabi oil sector (see analysis).

Hatem Nuseibeh, Total’s president for the UAE, told OBG that PI was contributing heavily to Emiratisation in the industry. “For the first time we have a sustainable source of talent and continuity in supply,” Nuseibeh told OBG. “The second phase, though, will be ensuring that we rotate these professionals within the industry, so that they can become the basis of research and development in Abu Dhabi.”

Another significant change resulting from PI will be the increase of female Emirati graduates that enter into the petroleum sector. “Half of PI’s graduates will be female,” Nuseibeh told OBG. “They will be contributors to the future of the sector. The challenge for us as an industry will be adapting so as to allow women to contribute fully to the industry while being able to maintain a work-life balance.”


Despite falling oil prices, the Abu Dhabi authorities remain committed to a long-term investment strategy that will see production reach a plateau of 3.5m bpd within the next two years. In light of OPEC’s continued stance toward market share, it is possible that global prices may continue to remain flat throughout 2016, with a recovery taking place somewhere toward the end of that year.

However, the fundamentals governing the current investment strategy appear geared more toward the long term, with the most significant current shift in the sector being that toward a more technical, EOR-driven approach to extraction.

Indeed, in the coming years the use of technology will play an increasingly key role in the emirate of Abu Dhabi, both in terms of driving new investment and in shaping the relationship between ADNOC and its international partners. Both the remaining concession agreements with ADCO and the soon to be renewed offshore concessions with ADMA-OPCO are likely to focus on knowledge sharing, which, given the current low-price environment, may require some additional incentives from ADNOC. It is clear though that a significant appetite remains for investment in Abu Dhabi’s oil and gas sector, as the Al Hosn sour gas project in particular has demonstrated. With demand for gas in particular continuing to grow at a strong rate, the coming years are likely to see ADNOC pushing ahead with investments in sour gas plays.


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The Report: Abu Dhabi 2016

Energy chapter from The Report: Abu Dhabi 2016

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