Abu Dhabi missing 2017 target for oil-output capacity boost

DUBAI (Bloomberg) -- Abu Dhabi will be at least a year late in boosting its crude-production capacity to a record 3.5 MMbpd, according to officials at the state-owned oil company.

The emirate will increase capacity only to 3.4 MMbopd by the end of 2017, Qasem Al Kayoumi, the offshore exploration chief at Abu Dhabi National Oil Co., said at a conference in Abu Dhabi. The expansion project may not be completed until 2019, Ali Rashid Al Jarwan, who heads one of Adnoc’s offshore production units, said at the event.

“This is because of some normal delays in such a large project,” Al Kayoumi told reporters. “There have been changes in scope.” Adnoc, with a current capacity of about 3 MMbopd, was targeting an increase of 500,000 by the end of 2017. The company will now probably add the final 100,000 bbl of daily capacity in 2018, Al Kayoumi said.

Abu Dhabi, the largest sheikhdom in the United Arab Emirates, holds most of the nation’s oil, about 6% of global reserves. Like other Persian Gulf producers, Abu Dhabi is drilling wells to maintain or increase production as it depletes older fields in the face of rising demand. The U.A.E. and other members of OPEC are to meet Friday in Vienna to assess output policy.

Price Collapse

Crude prices haven’t bounced back completely from a 50% drop last year amid a surge in supply of U.S. shale oil. Brent crude, a global benchmark, was at $65.45 a barrel at 1:05 p.m. in London, up 14% in 2015. Adnoc is cutting operating expenses this year by about 10% to offset some of the revenue lost to lower oil prices, Al Jarwan and Al Kayoumi said.

The delay in Abu Dhabi’s capacity expansion “makes perfect sense,” according to Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S. “One of the richest oil nations out there is in no hurry to speed up production, instead opting to keep it in the ground for a later date. With Iraq and Saudi Arabia beefing up production, I don’t think a reduction from Abu Dhabi would have that big an effect at this stage” on the market, he said by e-mail.

World demand will grow by an average of 1.2% through 2020, when it will reach 99.1 MMbopd, the International Energy Agency said in a February report. Consumption will outpace increases in production capacity over that period by about 1.5 MMbopd, the Paris-based energy adviser said.

Rig Count

Adnoc will deploy 100 drilling rigs in the emirate by the end of this year compared with 69 in 2014, said Al Jarwan, the chief executive officer of Abu Dhabi Marine Operating Co., known as ADMA-OPCO, the Adnoc unit running some of the emirate’s offshore fields. The rig count will rise to about 120 in 2017 and 2018 as the project to raise capacity nears completion, then decline to 103 from 2021 through 2024, he said.

Abu Dhabi currently pumps about 2.85 MMbopd and 250,000 of condensate, Al Jarwan said.

The oil-production concession for companies operating ADMA- OPCO’s fields expires in 2018. Adnoc may seek bids as early as next year from companies seeking stakes in a new venture, Al Jarwan said. Adnoc has hired a consultant to evaluate the fields and bidding procedures, Al Jarwan and Al Kayoumi said.