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Abu Dhabi approves ADNOC spending, unveils oil discovery to boost Murban futures plan

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Abu Dhabi approves ADNOC spending, unveils oil discovery to boost Murban futures plan

Highlights

Supreme Petroleum Council approves 5-year capex plan

Also reveals 22 billion-barrel unconventional oil discovery

New resources to support flagship Murban grade output

Dubai — Abu Dhabi, the oil-rich emirate in the seven-member UAE federation, is forging ahead with expanding its hydrocarbons sector in the face of the coronavirus pandemic, announcing a plan for state producer ADNOC to spend Dirhams 448 billion ($122 billion) over the next five years.

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Abu Dhabi's Supreme Petroleum Council, the emirate's highest energy policy-making body, approved the new capital expenditures, state oil producer ADNOC said in a statement Nov. 22. It is down from the previously announced investment plan, which called for $132 billion from 2019-2023.

ADNOC said the investments, along with new conventional and unconventional oil resources also unveiled Nov. 22, will help boost production of its flagship Murban crude.

The Intercontinental Exchange and ADNOC plan to launch a Murban futures contract on a new Abu Dhabi-based exchange on March 29, which they hope will transform how Middle East crudes are traded.

The start-up had been delayed from the first half of 2020 due to the pandemic.

The SPC announced the discovery of 22 billion stock tank barrels (STB) of recoverable unconventional onshore oil resources that ADNOC said had production potential on par with the most prolific North American shale plays.

Additionally, 2 billion STB in recoverable conventional oil reserves were announced, boosting the UAE's recoverable conventional oil reserves to 107 billion STB, ADNOC said.

"The increase in the UAE's conventional oil reserves sends a strong signal that ADNOC is leaving no stone unturned in unlocking value from our abundant hydrocarbon resources to ensure the UAE remains a long-term and reliable energy provider to the world for decades to come," ADNOC CEO Sultan al-Jaber said in the statement.

Boosting Murban

The plan comes at a time when international oil companies are slashing budgets and reducing their oil production to cope with low oil prices and anemic demand due to the pandemic. IOCs are also reining in their future oil and gas production as part of a clean energy push.

Not so, for ADNOC, which said its production capacity had already surpassed 4 million b/d after having previously said it would reach that level by year-end. It has said it intends to ramp up to 5 million b/d by 2030.

For now, a supply accord between OPEC and nine allies has curtailed UAE output to a quota of 2.59 million b/d through the end of the year, and sources have said the country has discussed exiting OPEC in order to support its ambitious expansion plans.

Murban is one of four crudes produced by ADNOC, which pumps the vast majority of the UAE's oil. Prior to the pandemic, its production stood at roughly 1.7 million b/d.

Murban futures will be the second physically delivered futures contracts traded on a regional exchange after Dubai Mercantile Exchange's Oman crude futures.

Murban is also a deliverable grade in the Platts benchmark Dubai and Oman crude assessments.

ADNOC and ICE are partnering with BP, GS Caltex, Inpex, ENEOS, PetroChina, PTT, Shell, Total and Vitol to launch IFAD.

ICE has also announced agreements with Chevron, Trafigura and Occidental to explore using the contract to price crude exports from the US to Asia, and sources familiar with the matter have said that more companies may sign on.

Bidding round

The Supreme Petroleum Council also gave ADNOC the go-ahead to award oil and gas exploration blocks as part of its second competitive bidding round that was launched in May 2019. It is estimated that the blocks hold billions of barrels of oil and trillions of cubic feet of gas, ADNOC said.

Abu Dhabi's five blocks that were opened for bidding -- three of which are offshore and two onshore -- are known as Offshore Block 3, Offshore Block 4, Offshore Block 5, Onshore Block 5 and Onshore Block 2, with the latter offering two separate licensing opportunities for conventional and unconventional oil and gas, respectively.

In total, the five blocks comprise an area of approximately 34,000 sq km.

ADNOC's first bid round concluded in March 2019 with awards to a consortium led by ENI and PTT Exploration and Production Public Co. for Offshore Block 1 and Offshore Block 2. Onshore Block 1 was awarded to Bharat Petroleum Corp. and Indian Oil Corp.; Onshore Block 3 was awarded in a concession to Occidental Petroleum; and Onshore Block 4 was awarded to INPEX Corp.

Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed, vice-chairman of the SPC, also instructed ADNOC "to explore potential opportunities in hydrogen with the ambition to position the UAE as a hydrogen leader," the company said.

"ADNOC already produces hydrogen for its downstream operations and following this mandate, the company will explore the potential to help meet the emerging global demand for hydrogen and ammonia derived from natural gas," the company added.