The chief of Abu Dhabi’s offshore oil company which controls about half of the emirate’s oil production is looking to cut costs sharply because of the downturn in the industry, although the company’s huge expansion remains on track.
“We are targeting 15 to 20 per cent cuts in operating expenses to take advantage of market conditions,” said Ali Al Jarwan, chief executive of Adma-Opco, reflecting the broad trend in the market of cuts because of the fall of more than 60 per cent in the oil price since last year.
Last week, Ali Al Shamsi, the head of strategy at Abu Dhabi National Oil Company, Adma-Opco’s parent company, said Adnoc was aiming for spending cuts of 25 per cent.
Across the global oil industry capital expenditure has been cut by an estimated 20 per cent this year to about $700 billion.
Mr Al Jarwan said, however, that Adma-Opco is still spending about US$25 billion through 2020 to develop a number of huge offshore projects to bring the country’s overall production up from 2.7 million barrels per day last year to 3.5 million bpd by the end of 2018.
He was speaking at the opening of an offshore conference which is running in parallel with this year’s record-breaking Adipec oil gathering in Abu Dhabi, with the overarching theme of continued expansion of production capacity in the Arabian Gulf region amid a tough global environment for the industry.
“This is not the first price cycle in the industry; I’ve seen it five times in my career,” said Mr Al Jarwan. “We have many cost optimisation teams working on it and we cannot afford the very high costs of operation we have seen … but I am happy to see a very healthy offshore industry in Abu Dhabi.”
The offshore element of production growth will account for half the total by the end of 2017 as Adma-Opco develops 11 operating fields, including Zakum, which is the world’s fourth largest oilfield.
Zakum is expected to raise production from 550,000 bpd to its target of 750,000 bpd this year and plateau there for 25 years, although the shareholders – led by Adma-Opco and ExxonMobil – are considering raising that target to 1 million bpd.
Three other major fields with a total investment of $16bn will be ramped up over the next two to three years – the Umm Lulu and Nasr fields, which have already begun production, and the Satah Al Razboot field, where two of four huge artificial islands have been built to eliminate the need for expensive rigs.
The three projects are targeting adding production of 275,000 bpd as part of the overall offshore target of 1.7 million bpd by the end of 2017.
“We have never before seen this much drilling and support activity offshore,” Mr Al Jarwan said.
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