State-owned Abu Dhabi National Oil Company (ADNOC) has recommended to the Supreme Petroleum Council (SPC) that Shell be awarded the concession for development of the 1bn cfd wellhead dry, ultra-sour Bab gas field (400-600mn cfd of which is sales gas). However, the SPC has rejected previous ADNOC recommendations, and until the Bab contract is endorsed by the SPC, it is not certain that it will go to Shell. Negotiations between ADNOC and Shell over contract terms will be difficult.
The high cost of producing difficult gas in the Gulf – between $4-6/mn BTU – and the subsidized price at which a producer is required to sell gas to end users in the UAE means that ADNOC may be forced to offer competitive terms. In fact, Shell is reportedly discussing pulling out of its South Rub’ al-Khali (SRAK) development in Saudi Arabia, where the cost of producing gas is expected to be over $6/mn BTU (see p5). Fully aware of the need to offer more competitive terms in the Bab field, Abu Dhabi has dragged its feet since launching tenders in 2007. (CONTINUED - 1000 WORDS)