ABU DHABI (U. A. E.)

Pragmatism has guided Abu Dhabi National Oil Co. (Adnoc) since its formation in 1971. It explains the relative complexity but smooth operation of the company's holdings today.

Adnoc was formed in the same year as the emirate that owns it. Abu Dhabi became a sovereign state when the U.K. withdrew as protector of the old Trucial Coast sheikhdoms, creating the United Arab Emirates.

That was 13 years after the first oil discovery in what is now Abu Dhabi, which is the U.A.E.'s major oil producer and only refiner.

From the very first, Adnoc moved carefully,. In stages, it acquired from the international companies already busy in Abu Dhabi majority stakes in existing concessions but left some interests in the hands of the companies. The aim was to lay sovereign claim to resources of the new state without losing the technological and financial advantages of international partnerships.

Original concessionaires remain Adnoc partners. And Adnoc itself has developed to the point that it works not just through domestic and international joint ventures but as a sole risk operator as well.

Abu Dhabi has reserves estimated at 92 billion bbl of oil and 188 tcf of natural gas. Adnoc operates two refineries, one with 120,000 b/cd of crude distillation capacity at Ruwais and the other with 72,500 b/d of capacity at Umm Al-Nar.

In addition, its 51% owned subsidiary Abu Dhabi Gas Liquefaction Co. Ltd. (Adgas) operates the 2.5 million metric ton/year Das Island LNG export facility, where a third train doubling capacity will start up next year.

INDUSTRY STRUCTURE

Adnoc conducts upstream work through three operating companies, which account for about 93% of the emirate's oil production (Tables 1 and 2).

Abu Dhabi Co. for Onshore Oil Operations (ADCO) holds concessions onshore plus a 3-6 mile strip below the high water mark off the coast and around islands and coral reefs. Its production comes from Bab, Bu Hasa, Asab, Sahil, and Shah fields.

ADCO became a national company in 1978, succeeding the old Abu Dhabi Petroleum Co. (ADPC), a venture of the current ADCO partners. Adnoc had acquired a 25% interest in ADPC in 1973 and increased it to 60% in 1974.

Abu Dhabi Marine Operating Co. (ADMA-OPCO) grew out of the old Abu Dhabi Marine Areas Ltd., which began as a joint venture between forebears of British Petroleum Co. plc and Total-CFP. It was ADMA Ltd. that made Abu Dhabi's first oil discovery - offshore Umm Shaif field in 1958.

As it did with ADCO's predecessor, Adnoc acquired 25% interest in ADMA in 1973 and 60% in 1974. It formed ADMA-OPCO as a national company in 1977. ADMA-OPCO produces oil from Lower Zakum field as well as Umm Shaif.

Zakum Development Co. (Zadco) was formed in 1977 when Adnoc decided to develop Upper Zakum field, part of the original ADMA concession. BP and Total chose not to participate. Japan Oil Development Co. (Jodco), which had acquired part of BP's interest in ADMA in 1974, did participate and remains Adnoc's partner in Zadco.

In 1988, Zadco absorbed operations of another Adnoc-jodco venture formed to develop Umm Al-Dalkh and Satah fields. Zadco handles production from its three fields with facilities on Zirku Island.

There are four offshore producing operations in Abu Dhabi in which Adnoc holds no interest.

The Japanese consortium Abu Dhabi Oil Co. operates two fields, Mubarras and Umm Al Anbar. Production from both travels by pipeline to Mubarras Island for processing, storage, and export.

Total-ABK operates Abu Al Bukhoosh field on the border with Iran. Production goes into a tanker. Total-ABK's partners are units of Kerr-McGee Corp. and Amerada Hess Corp.

The government of Abu Dhabi, in a 50/50 partnership with Qatar, produces from Al Bunduq field. After first-phase separation, production is commingled with that of Zakum field and carried by pipeline to Das Island.

And Amerada Hess operates Arzana field, with personnel and facilities on Arzana Island.

GOVERNMENT CONTROL

While Adnoc exercises control of its operating companies as the majority shareholder, it answers to the Supreme Petroleum Council (SPC), which was formed in 1988 to formulate petroleum policy (Table 3). The SPC chairman is Khalifa Bin Zayed Al Nahyan, crown prince of Abu Dhabi, deputy supreme commander of the U.A.E. armed forces, and chairman of the Abu Dhabi Executive Council. Khalifa is the ultimate authority in oil and gas matters.

Adnoc is responsible for implementing SPC policies and decisions. Its general manager, Sohail F. Al Mazrui, sits on the SPC as secretary general.

Adnoc has nine directorates, organized by function.

The Exploration and Production Directorate handles activates on concessions operated by the three joint-venture operating companies as well as on Adnoc's sole risk concessions. Its goal is to ensure that the emirate is fully surveyed and explored and that it achieves maximum production capability.

The E&P Directorate also coordinates activities of the four joint-venture support and services companies and of the wholly owned National Drilling Co.

Head of the E&P Directorate is Rashid Saif Al Suwaidi.

The Processing Directorate is headed by Khalif Al Otaiba. It oversees Adnoc's two refineries, gas processing, operations, and a 575 km gas distribution pipeline network.

Nasser Ahmed Al Suwaidi heads the Marketing Directorate, which handles domestic and international marketing of crude from Adnoc's joint-venture producing companies and products from its refineries.

The Marketing Directorate also handles sales of natural gas liquids from Adnoc's equity share in Abu Dhabi Gas Industries Ltd. (Gasco), which operates extraction plants for associated gas at Bu Hasa, Bab, and Asab fields. The liquids are fractionated at Ruwais. Most are exported.

Adnoc's other directorates are less directly involved in operations-with one exception. Their functions are planning and coordination, projects, administration, finance, data processing services, and personnel.

The exception is the Planning and Coordination Directorate, which has a "group coordination division" that coordinates and monitors joint-venture operations of Gasco, Adgas, and Ruwais Fertilizer Industries (Fertil).

Adnoc's partners in Gasco are Shell Gas BY, Total, and Partex; in Adgas, Miutsui & Co. Ltd., BP, and Total; and in Fertil, Total alone.

The Projects Directorate implements capital projects for Adnoc and, sometimes, its affiliates.

Adnoc's upstream operating companies work within a formal decision making structure.

Twice a year, representatives of the shareholders of each operating company meet to formulate and adjust 1 year and 5 year plans. Company directors approve those plans, which include work programs and budgets.

A joint management committee (JMC) involving officials of the Adnoc directorates reviews and approves the operating company plans. Mazrui, the Adnoc general manager and SPC secretary general, presides. The JMC can make final decisions on most matters.

CURRENT ACTIVITY

Adnoc is expanding oil production capacity, mainly in two fields-Upper Zakum offshore and Bab onshore (OGJ, Apr. 19, p. 17).

Drilling activity is steady. Abu Dhabi recently had 16 rigs at work, 9 of them onshore.

Onshore, Adnoc is expanding gas production capacity to stay in step with the emirate's growing needs and plans to increase condensate production to 130,000 b/d by next year.

A major emphasis of the E&P Directorate has been to improve seismic coverage. It has commissioned land and marine seismic surveys covering most of the country, much of it 3D.

The seismic work aims both to improve understanding of known reservoirs and to identify new exploratory targets. Das Island's third LNG train is the biggest downstream project. The new train will liquefy about 430 MMcfd of gas, so much offshore drilling relates to ensuring that sufficient gas is available.

All of Das Island's LNG and most of its LPG go to Tokyo Electric Power Co. The new train is being built in conjunction with a contract for the Japanese utility to double its purchases from Adgas.

Adnoc's refineries fulfill all of Abu Dhabi's product needs and export some products. The company is considering expansion of crude capacities at Umm al Nar to 85,000 bid and at Ruwais to 270,000 b/d but has no schedule for the work. The Ruwais expansion would include addition of 120,000 b/d of condensate processing capacity.