Abu Dhabi Company for Onshore Oil Operations (ADCO) is responsible for more than 60 per cent of the Emirate of Abu Dhabi’s oil production. ADCO is also a major producer of both associated gas and natural gas for Abu Dhabi and is today delivering 4-5 billion standard cubic feet of gas per day to its sister company, Abu Dhabi Gas Industries Limited (GASCO), and production will grow further as the company increases its oil production and the huge developments planned by GASCO are realised.

Abu Dhabi National Oil Company (ADNOC) has a 60 per cent shareholding in ADCO, with Shell, BP, ExxonMobil and Total each holding 9.5 per cent and Partex the remaining 2 per cent. ‘Shell in the Middle East’ talks to Abdul Munim Al-Kindy, General Manager of ADCO, about the challenges involved in today’s oil and gas business and the part played by Shell as a shareholder in the company...

ADCO is embarking on a major expansion of its operations in response to guidelines from the Supreme Petroleum Council and ADCO’s shareholders to increase sustainable oil production capacity by an additional 400,000 barrels of oil per day (bopd). First oil from the capacity expansion programme is scheduled for 2011 and thereafter production will ramp up to 1.8 million bopd by the year 2016.

Similar plans exist with sister companies, namely ADMA (Abu Dhabi Marine Operating Company) and ZADCO (Zakum Development Company), which are producing oil from offshore fields. There are also some small contributions to Abu Dhabi’s oil production from other operators.

Abdul Munim Al-Kindy, General Manager of ADCO, says, “Increasing capacity in a sustainable manner means that we do not just turn on the taps to increase the flow of oil. This can be done of course, but it does not fit with our long-term reservoir management guidelines. Oil is, after all, a natural resource and represents the wealth of the Emirate, for today and for future generations.

“So sustainability of the additional production for at least 25 years is an integral requirement that must be part of the expansion plans.

“To do this properly we need to carry out a lot of research and to study our reservoirs properly. We conduct extensive reservoir modelling and examine a host of very important issues, such as pressure maintenance and sweep efficiency. That is the only way we can assure the integrity of our reservoirs.

“This country is not only blessed with oil but also with the wisdom and vision of its leaders. Our reservoir management guidelines were largely based on sentiments expressed by His Highness Sheikh Zayed, the late President and Founder of the United Arab Emirates, God bless his soul, when he expressed a desire that the last drop of oil should come from Abu Dhabi. “The Supreme Petroleum Council, chaired by His Highness Sheikh Khalifa, continues to steer us along the same guidelines. This unique visionary leadership can also be demonstrated in the way Abu Dhabi handled its gas resources.

“Long before others saw the importance of gas, and despite negative recommendations given at the time by economists, Abu Dhabi proceeded with development of its gas gathering projects with a few partners that shared the same outlook, and Shell was amongst them.

“As a result, GASCO came into being to handle onshore gas. ADGAS [Abu Dhabi Gas Liquefaction Company Limited] was established to handle offshore gas and was one of the first companies to apply LNG [Liquefied Natural Gas] technology. Both companies enabled significant reductions in environmental impact by virtually eliminating gas flaring and are now huge contributors to the wealth and security of energy supplies for the country.”

He goes on to say, “ADCO manages operations in some of the world’s largest reservoirs, some of which cover an area of over 1,000 square kilometres. A ‘super giant’ reservoir is not something that can be studied overnight. It needs a lot of time to gather information and each well that we drill further enhances our knowledge of the reservoir.

“The frequent well testing, logging and reservoir monitoring programmes which we employ, and the application of seismic data, are all used in the models that we have been building and refining for many years. This is an endless task and must be kept high on our priority list.

“Complexity increases as reservoirs age, and this is where our shareholders’ input can be extremely important. Shell has always been at the forefront of the action, providing support and suggestions whenever appropriate. One of Shell’s significant contributions was in the area of drilling and, indeed, ADCO adopted Shell’s drilling optimisation technology, known as Drilling the Limit™, several years ago. This technology is still being employed in the fields today, it works very well and has saved ADCO millions of dollars in our drilling programme.”

ADCO has never missed a shipment. In over 45 years, its lifting programme has always been met and it has never missed a cargo, whilst maintaining one of the best HSE [Health, Safety and Environment] records in the industry. This is something, says Abdul Munim, of which the company is proud. “We have always been able to produce what we have promised,” he says, “and we intend to maintain that record and reputation.

“The demand for gas in the UAE as a fuel for power stations, water desalination and other industrial uses is rising faster than can be met by internal supply, partly because gas is used to sustain the oil reservoirs.

“In the short term, the country will have to look at meeting this demand from other sources. This it has already done through the importation of gas through the Dolphin pipeline and facilities from Qatar, and plans are underway to satisfy longer-term gas demand by developing new reservoirs, and improving the management of existing supplies.

“CO2 [carbon dioxide] is another major issue at the moment, not just within the UAE or Middle East but globally. Abu Dhabi is obviously playing an active role in the protection of the environment. The ADNOC Group of Companies is very keen on, and supportive of, moves to reduce greenhouse gas emissions, specifically CO2 emissions, and hence reduce global warming and we are further exploring opportunities for CO2 utilisation.

“One such opportunity, the injection of CO2 into oil reservoirs, is however a great technical challenge. Key requirements need to be fulfilled before we can be confident that damage is not caused to the reservoirs. We are studying, with ADNOC and shareholders, the viability of CO2 injection to replace gas for injection,” says Abdul Munim.

“We have undertaken some preliminary studies and modelling work to evaluate recovery mechanisms with CO2 and its impact on carbonate reservoirs. Further, we are assessing the miscibility and the purity of CO2 for reservoir management purposes. At the same time we are examining viable sources for CO2 capture, be it from the air, flue gases or turbine exhausts.

“One of the main challenges for Abu Dhabi will be to maintain today’s levels of production far beyond 2030 and to do this we will need to maximise the use of EOR [Enhanced Oil Recovery] and IOR [Improved Oil Recovery] technologies. We are now screening applicable technologies, training staff and carrying out tests and studies for the specific purpose of implementing EOR. There is a huge scope for us to sustain our production levels by utilising these technologies as our reservoirs mature, and we are reviewing which applications can be best used.

“ADCO has over 20 undeveloped fields, most of which are relatively small fields that will require extensive work and evaluation before their development. However, two of these fields, Qusahwira and Bida Al Qemzan, are in our current plans for development.

“The challenges of developing smaller fields are really related to cost, which we need to minimise as much as possible and to employ relevant and practical technologies, such as smart wells, three phase pumping and metering and remote telemetry control.

“This year we successfully commissioned the North East Abu Dhabi fields of Dabb’iya, Rumaitha and Shanayel, which are now on-stream. In total ADCO has over 2,500 wells and currently has on hire 17 drilling rigs to fulfill its exploration, development drilling and maintenance work. One additional rig will be hired shortly from the National Drilling Company.”

On the subject of Shell’s role in ADCO and the company’s human resources, Abdul Munim says, “Shell is one of ADCO’s important shareholders and has been very helpful to ADCO in all its operations. Today, with shortages in the international market of skilled and experienced people, we are very pleased to have 15 Shell secondees working at ADCO. In the current international market, all energy companies are struggling to find resources and it would be quite difficult to find staff with the level of experience and skills we get from our shareholders.

“When it comes to human resources, ADCO has a number of challenges. On the one hand, we have new UAE graduates coming into the business and, on the other, an ageing population of experienced and highly-skilled staff. Indeed, here at ADCO, some 50 per cent of the company’s employees will retire within the next 10 years.

“Of course we want to integrate our recently engaged UAE Nationals as quickly as possible. ADNOC and its Group Companies developed a Competency Assurance Management System that ensures the effective and timely integration of graduate UAE Nationals into operational positions. Shell has contributed to the development of this system, which is now fully deployed.

“Nationals joining the company go through a systematic process relating to the acquisition of knowledge and the verification of their experience. Today we are very encouraged and impressed with the progress of graduates from the local universities and the Petroleum Institute. ADNOC Group of Companies, and ADCO in particular, will continue to offer UAE Nationals the best opportunity in the country for a challenging and gratifying career.

“The company has also opened its doors for Emirati female employees to work in the field and I am very proud that, locally, we are the first company to do so. Today we have two ladies working in the North East Abu Dhabi fields, and are encouraged with this success. ADCO now has over 50 per cent UAE Nationals, whilst within the leadership positions it is as high as 90 per cent.

“Of course it is not just human resources which are in short supply in today’s over-heated markets. We have also had to face big escalations in price on equipment, materials and fuel. As a consequence we have seen estimates for projects triple. Securing major pieces of equipment, such as high-power, high-pressure pumps, which used to take some six months to deliver, can now take up to as much as two years. It used to take one year to order a drilling rig, now it can take up to three years. This complicates our work and we will need to improve our planning and early alignment with our shareholders, and develop appropriate contingency plans.

“ADCO is an operating company, its licence to operate is dependent on the trust of its shareholders and the Supreme Petroleum Council. This trust has allowed us in the past to proceed with our development plans, and we aim to maintain that trust and confidence to achieve our objectives, with the highest level of HSE commitment and operational excellence.

“ADCO is very proud of its HSE record and in comparison with the market locally, regionally, and internationally, we have maintained an excellent safety record. Our LTI [Lost Time Injury] frequency for the first quarter of 2008 is running at less than 0.3 per million man hours worked, but our target is to reduce this to 0.2 per million man hours worked for the whole year.

“ADCO has very good relationships with Shell and particularly with Shell’s Country Chairman here in Abu Dhabi, Nejib Zaafrani. Shell has been very active in Abu Dhabi and has made contributions to many of the ADNOC Group of Companies, and to the Petroleum Institute, and I hope this support will continue.

“As we speak, we have ADCO drilling and operations staff visiting Shell’s offices in Houston in the USA, to share experience and explore opportunities for co-operation. So we feel that we have a real partnership with Shell, and this is very valuable to us. Long may it last,” Abdul Munim concludes.