Identifier
Created
Classification
Origin
06ABUDHABI470
2006-02-11 11:28:00
CONFIDENTIAL
Embassy Abu Dhabi
Cable title:  

ADNOC DEPUTY CEO ON ADNOC EXPANSION PLANS

Tags:  EPET ENRG AE 
pdf how-to read a cable
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ZNY CCCCC ZZH
P 111128Z FEB 06
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC PRIORITY 3520
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RHEHAAA/THE WHITE HOUSE WASHINGTON DC
RHEHNSC/NSC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000470 

SIPDIS

SIPDIS

DEPARTMENT FOR NEA/ARPI, EB/ESC/IEC/EPC
NSC FOR HUTTO
ENERGY FOR SENIOR FOREIGN POLICY ADVISOR MOLLY WILLIAMSON,
AND DAS BRODMAN
OVP FOR KEVIN O'DONOVAN

E.O. 12958: DECL: 02/11/2016
TAGS: EPET ENRG AE
SUBJECT: ADNOC DEPUTY CEO ON ADNOC EXPANSION PLANS


Classified By: (U) Classified by Ambassador Michele J. Sison for reason
s 1.4 (B) and (D).

This cable contains business proprietary information.

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000470

SIPDIS

SIPDIS

DEPARTMENT FOR NEA/ARPI, EB/ESC/IEC/EPC
NSC FOR HUTTO
ENERGY FOR SENIOR FOREIGN POLICY ADVISOR MOLLY WILLIAMSON,
AND DAS BRODMAN
OVP FOR KEVIN O'DONOVAN

E.O. 12958: DECL: 02/11/2016
TAGS: EPET ENRG AE
SUBJECT: ADNOC DEPUTY CEO ON ADNOC EXPANSION PLANS


Classified By: (U) Classified by Ambassador Michele J. Sison for reason
s 1.4 (B) and (D).

This cable contains business proprietary information.


1. (C) Summary: On February 7, ADNOC Deputy CEO Abdulla
Nasser Al-Suwaidi (protect) told econchief that Abu Dhabi's
Supreme Petroleum Council (SPC) had approved Exxon/Mobil's
bid for a 28% stake in the Upper Zakum field and was offering
Exxon/Mobil a 20 year concession on the field. He noted that
ADNOC was thinking about splitting up its onshore concession
into multiple concessions and/or opening it up for bid when
it expired in 2014. Al-Suwaidi said that onshore production
capacity was on target to increase to 1.4 million b/d by
early 2006 (with 100,000 b/d added in 2005 and around another
100,000 in early 2006). He also noted that ADNOC had
identified another 200,000 b/d onshore and 400,000 offshore
that could be brought on-board by around 2010, if it began to
invest immediately. He said that Exxon/Mobil had presented a
plan to bring production from the Upper Zakum field to
750,000 b/d in around seven years. End Summary.

SPC Picks Exxon/Mobil for Upper Zakum
--------------


2. (C) On February 7, Abu Dhabi National Oil Company (ADNOC)
Deputy CEO Abdulla Nasser Al-Suwaidi told econchief that the
SPC had approved Exxon/Mobil's bid for the 28% stake in the
Upper Zakum oil field. He said that he anticipated that
ADNOC and Exxon/Mobil would be able to sign the contract
shortly after any final details had been worked out. He
explained that the decision would not be made public until
both parties decided on a date for signature, and asked that
the matter be treated confidentially. In a separate
conversation with Exxon Al-Khaleej President Frank Kemnetz
(protect) he confirmed the deal and the fact that Exxon/Mobil
would not publicly disclose the deal ahead of ADNOC.
Al-Suwaidi acknowledged that the information would get out
through the rumor mill, but noted official confirmation was a
different matter. Al-Suwaidi told econchief that

Exxon/Mobil's concession in Upper Zakum would run until 2026,
solidifying the company's presence in Abu Dhabi. He added
that ADNOC had extended the Japan Oil development Company's
(JODCO) 12% concession in the field for the same amount of
time. Al-Suwaidi confirmed that there had originally been
interest in splitting the 28% stake among several investors,
but that he had argued that this would not serve the UAE's
best interest. He explained that the complicated nature of
Upper Zakum required high-end technology, which was
proprietary to the individual oil companies. Under a sharing
arrangement, companies would be reluctant to share their
technology.


3. (C) Al-Suwaidi said that Exxon/Mobil had presented ADNOC a
plan to bring Upper Zakum capacity from its current level of
520,000-550,000 barrels per day (b/d) to 750,000 b/d in
around seven years. The first 3 years, Exxon/Mobil would
need to "study" the fields, and would then begin to develop
the asset. Al-Suwaidi said that some in the SPC were
concerned about the lead time for the study and asked "what
if Exxon/Mobil can't bring the field to 750,000." He said
that ADNOC had assured them that the 750,000 represented an
IOC consensus on the field's production capacity, and that
Upper Zakum had already reached production of 600,000 b/d but
ADNOC had reduced production out of concerns for the
reservoir. He noted that given the size of the field,
750,000 b/d shouldn't be a problem and that ideally ADNOC was
interested in seeing if the field could eventually produce 1
million b/d.

Onshore Concession renewal to open for bid?
--------------


4. (C) Al-Suwaidi said that the Abu Dhabi Company for Onshore
Operations' (ADCO) oil concession would expire in 2014 and
that ADNOC was looking at how to renew it. He confided that
Abu Dhabi was considering splitting the concession and/or
opening it up for bid rather than just negotiating with the
foreign shareholders on a renewal of their 40% stake in the
company, citing the Upper Zakum bid as a possible model. He
said that "the Sheikhs" were concerned that ADCO's
international shareholders were not pushing to expand
production capacity as rapidly as Abu Dhabi might wish.
Al-Suwaidi said that he understood the international

ABU DHABI 00000470 002 OF 002


shareholders' position as OPEC quotas normally capped ADNOC's
production and that fiscal terms of one dollar per barrel
meant that the international partners didn't benefit from the
current price rises. He acknowledged that the current
arrangement had served Abu Dhabi well, but that more
competition could enable Abu Dhabi to get the best possible
deal for its oil and gas. Al-Suwaidi stressed that the
incumbents would still be able to bid on the concessions, but
that they might not be able to count on an automatic renewal.


Increases in Onshore Production Capacity
--------------


5. (C) Al-Suwaidi stated that ADCO was on track to a
sustainable production capacity of 1.4 million b/d by early
2006, confirming that it had added 100,000 b/d capacity in
2005 and would be bringing on another 100,000 by early 2006.
He described his efforts in the late 1990s to encourage
ADCO's international shareholders to develop three fields in
Northeastern Abu Dhabi (Al-Dabbiya, Rumaitha, and Shanayal),
adding that he had obtained agreement in 2000 to develop
those fields, which collectively contain an estimated eight
billion barrels of oil. These 3 fields would collectively be
able to produce 110,000 b/d in early 2006 (accounting for the
additional 100,000 b/d that ADCO publicly announced, on
February 5, that it would add). Al-Suwaidi said that ADCO
treated the three fields as one project, since the oil would
be collected at one or two gathering stations and that
production capacity had already reached the halfway point of
about 50,000 b/d.


6. (C) Al-Suwaidi confirmed press reports that ADCO had added
100,000 b/d production to the Bab field in 2005, bringing its
total surface capacity to 350,000. He noted that ADNOC had
identified another 200,000 b/d in capacity that it could
bring on line by around 2010, if it started investing now.
He noted, wryly, that his problem would be to try and
convince the foreign shareholders to make the investment,
especially since the concession would be running out shortly.


Offshore Production Increases
--------------


7. (C) Al-Suwaidi briefly turned the discussion to plans to
increase production at the Abu Dhabi Marine Operating
Committee's offshore concession, (which expires in 2018). He
said that a program was on track to bring sustainable
production in ADMA/OPCO to 600,000 b/d. Currently, he noted
that ADMA/OPCO's sustainable production capacity was 577,000
b/d. He added that ADNOC had identified another potential
400,000 b/d in new production capacity that could be brought
on line by around 2010 if investment started now -- this
would include another 100,000 from Lower Zakum and 300,000
from new fields (including one named Umm Lulu -- the mother
of the pearl).

Gas injection
--------------


8. (SBU) In a January 29 conversation between econoff and
ADNOC's managers for onshore and offshore production, they
discussed Abu Dhabi's use of gas injection for reservoir
management. They noted that increasing oil production at the
Upper Zakum field would definitely require gas reinjection,
which would likely come from offshore fields. They commented
that Abu Dhabi needed to use much of its gas for reservoir
management, adding that the Dolphin project (to bring natural
gas to the UAE from Qatar) would complement Abu Dhabi's plans
to expand gas production and would hopefully bring gas to
market in a "cheaper, safer" manner. They mentioned that
ADNOC was studying using CO2 for injection, and that -- if
the new process were successful -- it would capture CO2 from
power plants rather than using subsurface CO2. Al-Suwaidi
told econchief that the Japanese had some new CO2 recovery
technology that ADNOC was evaluating. He stressed that
ADNOC's evaluations were still preliminary, noting that he
was, by nature, cautious about the claims of any particular
engineering firm, assuming that they would say anything to
"get a contract."
SISON