Abu Dhabi’s Total partnership continues to evolve

Over that illustrious period Total has integrated itself with the energy business in Abu Dhabi arguably more completely so than any other international oil company, with interests in the upstream, power, fertilizers and renewable sectors, not to mention the flagship cross-border and tri-nation Dolphin Energy gas network.

The company’s involvement in Abu Dhabi leaves few energy sectors untouched. Total holds a 75% stake in the Abu Al Bu Khoosh field (operator), a 9.5% stake in ADCO, which operates the five major onshore fields in Abu Dhabi, and a 13.3% stake in ADMA, which operates two offshore fields.

TOTAL also has a 15% stake in Abu Dhabi Gas Industries (GASCO), which produces LPG and condensates from the associated gas produced by ADCO, and a 5% stake in Abu Dhabi Gas Liquefaction Company (ADGAS), which produces LNG, LPG and condensates.

Total’s production was 240,000 barrels of oil equivalent per day (boe/d) in 2011, up from 222 kboe/d in 2010 and 214 kboe/d in 2009. Last year’s increase was largely attributable to higher production by Abu Dhabi Company for Onshore Oil Operations (ADCO) and Abu Dhabi Marine (ADMA).

Just last year, Total and IPIC, a government-owned entity in Abu Dhabi, inked an agreement with a view to developing projects of common interest in the upstream oil and gas sectors.

The Group has a 24.5% stake in Dolphin Energy Ltd. alongside Mubadala, a company owned by the government of the Abu Dhabi Emirate, to market gas produced primarily in Qatar to the United Arab Emirates.

The Group also owns 33.33% of Ruwais Fertilizer Industries (Fertil), which produces urea. Fertil 2, a new project, was launched in 2009 to build a new granulated urea unit with a capacity of 3,500 t/d (1.2 Mt/y). This project is expected to allow FERTIL to more than double production so as to reach nearly 2 Mt/y in January 2013.

“In our 70-plus years in Abu Dhabi, we have developed over time a suite of very strong partnerships with ADNOC, and we have extended and enhanced those relationships with companies such as Mubadala with the Dolphin Energy project, ADWEA and more recently Masdar. Over the decades we have seen a continuous and ever increasing presence of Total in the UAE,” says Jean-Luc Guiziou, President of Total UAE.

What makes the relationship work, Guiziou says, is an ingrained mutual understanding which has evolved throughout the decades of collaboration.

“Total was born in the Middle East so that has been a natural vector for us. The growth of Total as a company has complemented the growth of the countries here in the region, and generally kept pace with that.

One of the keys to our continued success is that we have developed and understood what makes a sustainable relationship between the national oil company, and an IOC like Total.” That relationship has yielded impressive results for both parties, none less important, Guiziou says, than the contribution made to human capital in the Emirate.

Article continues on next time …

“I think it is fair to say that we can be proud, collectively with our partners within ADCO and other ADNOC co-ventures, of the route that has been followed over the last 40 years. We have been involved in the increasing autonomy of those operating companies. The advent now of the top management positions being entirely held by UAE nationals, which is an important success story in itself.”

The evolution of the NOCs in terms of capability is an exciting and interesting area to focus on, now perhaps more so than ever, with the ADCO concession up for renewal in 2014.

Whilst many of the day-to-day upstream activities are well within the skill set the region’s NOCs have achieved, the emphasis on developing and nurturing more complex fields and challenging resources has grown in importance.

“I would say the value contribution of IOCs such as Total to companies like ADMA and ADCO remains a real subject. We still need to go on with contributing technology and be part of developing other core competencies and know-how.

To some extent we are already reinventing the relationship with the OPCOs and our peer companies to tackle the future challenge that will continue to change over time,” he says.

Abu Al Bu Khoosh
In addition to the strong ties with Abu Dhabi’s primary OPCOs, the jewel in the crown of its Abu Dhabi operated assets is the Abu Al Bu Khoosh offshore field. In 1972 the late Sheikh Zayed requested the field be developed quickly, and Total was only too happy to help.

“The company responded positively to the request and under that agreement the concession as it was granted then runs until 2018. ABK is essentially a single-field concession which Total has a 75% stake in. Total ABK is a 100% full-fledged operating company of Total and has full responsibility for running that field,” explains Guiziou.

Today ABK produces around 120,000 barrels of oil equivalent per day, 10,000 barrels a day being oil production, and around 110,000 barrels of oil equivalent per day of gas being produced for ADNOC and partly committed to the IGD for the onshore gas network which includes provisions for ADWEA.

The field has been in production for more than 35 years now and Total, says Guiziou, has been able to contribute with leading edge technology over that period of time, to achieve what is today the highest level of recovery across some of the fields in the whole region.

“In some of the ABK reservoirs we have reached 55% recovery which is excellent by any metric, and extremely high from a regional perspective. The theory of Total with regards to ABK is to push technology to maximize the overall production of the field and push back the ultimate production date,” he emphasizes.

Among those advanced technologies being implemented is a full field gas injection programme which has been in play for many years. “The enhanced oil recovery techniques which have been deployed have certainly played an important role in achieving that 55% recovery factor,” he adds.

Guiziou says the company is now exploring more elaborate EOR techniques to boost the overall production.

“Future plays may be chemical based EOR techniques which are under development in several parts of the world. We would start with a pilot programme to assess the efficacy of those techniques on the ABK reservoirs, and also to prepare for the future of the offshore and onshore reservoirs in Abu Dhabi.

Each reservoir and geological basin has its own characteristics regarding salinity and temperature, so these technologies need to be customized to fit the resources where they are being used.”

Article continues on next page …

Grandeur of Gas
The role of gas in the regional energy mix is immense. Last month it was revealed that 99% of Dubai’s electricity and desalination needs were being met by natural gas, much of it imported.

As Abu Dhabi and its fellow Emirates continue to develop at breakneck pace, and with ever greater emphasis being placed by the governing authorities on enhancing non-oil based economies including energy intensive manufacturing and petrochemical projects, demand it set to continue to grow in step with those ambitions.

Total’s role in the regional gas scene is perhaps best illustrated by its involvement in the region’s first cross-border gas network delivered by Dolphin Energy, which takes its feed gas from offshore Qatar and delivers it through a sub-sea and cross-mountain pipelines to Abu Dhabi, the Northern Emirates and Oman.

In addition to this landmark achievement, Total is linked through partnerships and operations with much of Abu Dhabi’s domestic gas industry too.

Recently an extension to its arrangement with Gasco was signed, which will see Total, Shell and Partex, its founding partners with ADNOC, maintain a relationship dating back to 1978 through to September 2028.

The company sells LPG which is derived from associated gas from Abu Dhabi’s oil production through long-term purchase agreements, but also puts the production to good use locally by fuelling its key downstream projects with feedstock.

“Gasco is a great example of a success story. The company was born out of the need in the early 1980s to process the associated gas which came with the production from ADCOs oil fields. We have worked with our partners to extract the LPGs, but also ethane. That ethane now feeds Borouge, a huge petrochemical plant in Abu Dhabi,” explains Guiziou.

Today Gasco sells around 3.5 million tones of LPG annually, of which around 1.1 million tonnes is shared by the international partners as part of an offtake agreement.

Gasco also processes non-associated gas which is 100% owned by ADNOC from the Khuff formation, and in doing so has become the central unit to handle all of the onshore gas of Abu Dhabi and the overall production of Gasco is in the region of 10 million tones of LPG.

Back in the 1970s Total was among the founding partners of Abu Dhabi’s, and the region’s, first LNG plant. ADGAS is now a mature unit with a capacity of about 8m tones of LNG and associated LPGs annually. It has long term agreements which run until the end of the decade, 2019, with Japanese buyers.

Abu Dhabi has opportunities to utilize its gas resources further, and Guiziou says Total stands ready to partner with ADNOC to develop additional domestic gas.

“The UAE has some sour, and in some cases very sour gas reserves, which are very difficult to develop, and we are willing to contribute to assist in these developments as we feel it is an area of considerable strength for Total.

We have had a 50 year experience with very sour gas development in France, and we have important in-house technologies which are a good fit with these challenges. Our Sprex solution can separate the carbon dioxide and hydrogen sulphide from the commercial gas and reinject it into the reservoirs.

Al Hosn Gas Development Company is currently developing the super-sour Shah gas field in Abu Dhabi’s Western Region, in partnership with Occidental. This project will generate approximately 10,000 tonnes per day granulated sulphur.

Once a prized byproduct of sour gas production, the outlook for sulphur is less than desirable, given the impending development of increasingly sour reserves all over the world.
Guiziou is keen to highlight the advantage of Sprex over other scrubbing technologies, which enables highly sulphuric gas to be reinjected into pockets away from primary production.

“Sprex enables the operator to avoid producing very large quantities of sulphur which needs to be handled and transported.

In the coming years there will be a huge amount of sulphur production and we foresee a global market situation which is potentially overwhelmed with sulphur, so additional production of it in very large quantities is not necessarily strategically compelling,” he adds.

Article continues on next page …

Contract talks
The longstanding partnerships with IOCs and ADNOC’s operating companies ADCO and ADMA are respectively due to expire in 2014 and 2018 (profiled in detail on page 38) and any new deals will set the framework for the future roles of IOCs in Abu Dhabi.

“This is a process and initiative which belongs to Abu Dhabi,” says Guiziou. “The only thing I’d like to evidence is the importance of Abu Dhabi for Total. We have had a long history in Abu Dhabi. We hope we will be recognized by ADNOC as a value contributing partner to the future challenges of the large oil and gas fields which are here.”

Outside of the upstream opportunities, Guiziou says the company has built important relationships with Abu Dhabi’s investment vehicles.

“The successful partnerships we have developed with the entities of Abu Dhabi over time include the very successful Dolphin Project which has been a fantastic initiation for us with Mubadala, where our partnership extends beyond the range of Abu Dhabi, obviously in Qatar.

But we are also working with Mubadala in Asia where Mubadala has joined Total on exploration assets in Malaysia.”

Chief amongst these international partnerships is an agreement signed with IPIC to mutually develop investment opportunities signed in 2011. In August last year Total sold its 48.83% stake in Spanish refiner Cepsa to IPIC for US$5.26 billion. Total said at the time it would continue to expand its partnership with IPIC, particularly in exploration and production.

Looking forward
Abu Dhabi’s place in the Total global portfolio is very significant, in both oil and gas. “For oil and gas, our presence here corresponds roughly to 10% of our production worldwide.
We are producing this year approximately 245,000 boe per day. Total has an objective of increasing its global production, and we see Abu Dhabi as an important contributor to that goal.”

The gas business in the UAE is also an important component of Total. Through its participation in Gasco, and its stakeholding in Dolphin Energy, plus the potential future developments for domestic gas, Abu Dhabi contributes significantly to the company’s gas position globally.

“I’d also like to highlight the value contribution of Total to Abu Dhabi over the years,” Guiziou says.

“We have discussed what we have been bringing and continue to bring through our secondees at the OPCOs and through Total ABK, but we are also increasingly contributing to developing the human capital of Abu Dhabi. We have a flagship partnership between Total ABK with the Vocational Education Development Centre.”

The Total ABK-VEDC Academy provides education to young UAE nationals who train to become operators on offshore facilities.

“We started this as a feeder for Total ABK, but it has now become an important provider of young operators to other ventures of the ADNOC group of companies,” he reveals.

Guiziou sings off by highlighting his desire to continue building and developing the close ties with Abu Dhabi. “The relationships we have developed and the future relationships we could develop and maintain with Abu Dhabi are hugely important for Total.”

Article continues on next page …

More gas from Qatar?
The giant Dolphin Energy Export Pipeline initially carries gas at a maximum rate of 2 billion standard cubic feet per day, with provision for this to be expanded to 3.2 billion cubic feet per day, subject to a future agreement with Qatar.

Guiziou says Total is confident that this additional capacity will be filled in the future. “Some of that capacity beyond the 2bcf long-term contract, is already used with interruptible gas, purchased by Dolphin from Qatar and supplied to Abu Dhabi and the Northern Emirates.

In fact that interruptible gas flow has been maintained for almost three years now. The capacity of Dolphin to ship beyond the 2bcf/day allows us to ship almost half a bcf with the existing compression facilities and part of that capacity has been used for a steady flow for three years.” The purchasers of that gas are the Utilities in the other Emirates and they buy direct from Dolphin.

Shams Solar Project
In June 2010, the Emirate of Abu Dhabi selected the Total and Abengoa Solar consortium to partner with Masdar to build one of the world’s biggest concentrated solar power plants, the first of its kind in the Middle East, Shams 1.

The joint venture between Masdar (60%), Total (20%) and Abengoa Solar (20%) will develop, design, operate and maintain the power plant, located in Madinat Zayed, around 120 kilometers southwest of Abu Dhabi.

Shams 1 is based on an array of 250,000 parabolic troughs, and will help Abu Dhabi reach its target of generating 7% of its energy from renewable resources by 2020.

Shams 1 will cover an area of 2.5km2 and will have a capacity of more than 100 MW.
Construction began in 2010 and is expected to be complete in early 2013. Guiziou says he hopes that solar power generation is part of the opportunities that Total could capture across the region in the future. “The Middle East is certainly one of the regions of the world where solar power can contribute to the energy mix, complementing conventional gas fired power plants.”

Power Player
In Abu Dhabi Total has participated in every phase of the refurbishment and expansion of the Taweelah A1 plant.

This complex combines 1,430 MW of power generation capacity, equivalent to the amount consumed by a city of nearly one million people, and 385,000 cubic meters a day of seawater desalination capacity.

The water is used mainly for irrigation on farms and for the city’s plantations and parks. In its current configuration, Taweelah A1 uses as much as 85% of the energy stored in gas fuel.