ADNOC terminates $1.65 bil worth of contracts on gas project, Petrofac says

Dubai — Abu Dhabi National Oil Co., the UAE's biggest energy producer, has terminated $1.65 billion worth of contracts awarded in February to a Petrofac-led group for an ultra-sour Dalma Gas Development project in the Gulf state, the oil service company said on Thursday.

"Petrofac is committed to working with ADNOC over the coming weeks to explore alternative options to deliver this project in a way that supports their strategic objectives within the current challenging environment," it said in a statement, adding its portion of the work was valued at $1.5 billion.

"Petrofac continues to progress execution of its remaining group backlog of around $7 billion as planned and is still progressing with tendering for major contracts in Abu Dhabi. However, it anticipates this development may have an impact on the timing of their awards."

ADNOC made this decision in cooperation with its partners, a spokesperson said in a statement sent to S&P Global Platts.

"We took this decision together with our partners, as we continue to responsibly progress our projects while optimizing our costs, driving performance, efficiency and value across our portfolio," the ADNOC spokesperson said.

The Dalma Gas Development project, which is set to produce 340 million scf/d of gas, was expected to be completed in 2022, ADNOC said in February. Dalma is part of the Ghasha mega-project that is expected to produce over 1.5 bscf/d of gas when it comes on stream around the middle of this decade, ADNOC said at the time. Two contracts were awarded to UK-based Petrofac and a joint venture between Petrofac and Sapura Energy of Malaysia.

Reviewing projects

The Ghasha concession is made up of the Hail, Ghasha, Dalma, Nasr, SARB, Bu Haseer, Shuweihat and Mubarraz offshore sour gas fields in Abu Dhabi. ADNOC holds the majority stake in the concession, with Italy's Eni, Germany's Wintershall, Austria's OMV and Russia's Lukoil holding the remainder.

Eni will review its projects in the Middle East, including deals with ADNOC, as it seeks to cut capital spending due to the coronavirus outbreak and the oil price crash, Fuad Krekshi, its executive vice president for Middle East said last month. Eni has a 25% stake in the Ghasha concession.

The project had the potential to meet nearly 20% of the UAE's gas demand by the second half of this decade as well as produce more than 120,000 barrels/day of oil and high-value condensates upon completion, ADNOC said in February.

(Updates with ADNOC comment.)