Abu Dhabi National Oil Co. is expected to hit its target of boosting oil output capacity by 25% to 5 million b/d by 2030 through ramped-up exploration activity and the development of unconventional reserves, but the increment may be complicated by the UAE's quota commitments as OPEC's third largest producer.
ADNOC has managed to boost its capacity to 4 million b/d this year and has committed to spending $122 billion over the next five years to fuel its growth.
The capital expenditure figure is 10% lower than the $132 billion that was supposed to be spent between 2019-2023, but the spending reduction is still much lower than that of most international oil companies, according to Tom Kenison, a Middle East upstream oil analyst at FGE Energy.
"The more overriding question is whether this 5 million b/d production capacity is actually required, particularly when looking at the long-term call on OPEC," said Kenison.
The UAE produced 2.51 million b/d in November, according to the latest S&P Global Platts OPEC+ survey, below its 2.590 million b/d quota.
However, the OPEC+ alliance, which was supposed to ease its production cuts in January by increasing collective output by 1.9 million b/d, decided in a December meeting to raise production by only 500,000 b/d to temper weak global oil demand.
The UAE's January quota will be 2.626 million b/d, instead of the 2.735 million b/d that was originally slated for next month under the old OPEC+ agreement.
Natural decline
Such changes to OPEC+ agreements and the anemic oil demand outlook may frustrate the UAE's ambitious growth plans, which were hammered prior to this year's historic 9.7 million b/d collective cut implemented in May.
"We remain focused and confident on our production capacity plans as we have previously communicated to the market," an ADNOC spokesperson told Platts.
ADNOC needs to intensify exploration activity and develop new acreage for its capacity boost, according to analysts.
"The existing producing fields will suffer from natural decline rates, so additional exploration is required to not only increase capacity but also offset any declines," said Kenison.
The national oil producer has launched two competitive bidding rounds and awarded exploration concessions to a variety of companies to help achieve its 2030 target.
In its second bidding round, Occidental, Eni and Thailand's PTTEP were among the winners, adding to the previous awards they received in the first bidding round.
Seismic survey
"The 2030 target is the main reason ADNOC has launched two licensing rounds," said Ben Cahill, senior fellow, Energy Security and Climate Change Program, at the Center for Strategic and International Studies. "Exploration in neglected onshore and offshore areas will be an important part of progress toward this 5 million b/d target."
ADNOC announced on Nov. 26 the award of a new contract to BGP, a unit of China National Petroleum Co., to expand its 3-D seismic survey to cover an area up to 85,000 sq km and capture coastal areas, islands, and shallow water. The survey, first launched with a 2018 award to BGP covering onshore and offshore acreage, will be concluded in 2024.
The second-round awards follow the November announcement from Abu Dhabi's Supreme Petroleum Council -- its highest energy decision making body -- about the discovery of recoverable unconventional oil resources estimated at 22 billion stock tank barrels.
The council also announced an increase in conventional oil reserves of 2 billion STB, boosting the UAE's conventional reserves to 107 billion STB.
"Unconventional oil resources could contribute to ADNOC's production target, particularly following the recent announcement of 22 billion barrels of recoverable oil resource, which would rank above many US plays," said Liam Yates, research analyst, Middle East & North Africa upstream at Wood Mackenzie.
"However, there is still work to be done to prove the play can be developed commercially."
Existing fields
For the moment, ADNOC will need to concentrate on developing existing fields to reach its 2030 target.
One field that is likely to contribute a big chuck of increment is Upper Zakum, which is expected to add 250,000 b/d to reach 1 million b/d by 2024. ADNOC owns 60% of Upper Zakum, Exxon Mobil 28% and JODCO 12%.
Other fields that are expected to be developed further are Umm Shaif, South East Fields, Bu Hasa and Bab.
"Plans to expand existing fields are already being drawn up, however some have been delayed by the pandemic and oil price crash," said Yates.
ADNOC terminated $1.65 billion worth of contracts awarded in February to a Petrofac-led group for the ultra-sour Dalma Gas Development project. Dalma is part of the Ghasha concession that was supposed to produce gas and more than 120,000 barrels/d of oil and high-value condensates upon completion by the second half of this decade.
