Adnoc commits $764m on new drilling

Abu Dhabi's state-owned Adnoc has committed $763.7mn to three five-year drilling service contracts, to underpin much of its crude capacity-expansion plans that are at the heart of the UAE's standoff with Opec+.

Adnoc has awarded the contracts to US-based oil field services firms Schlumberger and Halliburton and to its subsidiary, Adnoc Drilling.

"These contracts are an important contributor to Adnoc Offshore's plans to build our production capacity to over 2 mn b/d in the coming years to support the Adnoc Group's smart growth strategy," said Adnoc Offshore chief executive Ahmad al-Suwaidi.

The contracts cover six artificial islands in the shallow waters of the Mideast Gulf that serve as platforms for operations at the Upper Zakum and Sarb fields. They will "drive efficiencies of drilling and related services, and optimize costs in our offshore operations as we ramp up our drilling activities to increase our production capacity and enable gas self-sufficiency for the UAE," said Adnoc's upstream director Yaser Almazrouei.

The biggest offshore contributors to Adnoc's capacity expansions will be the Lower Zakum, Umm Shaif and Nasr fields, where Adnoc plans an extra 210,000 b/d.

This news comes as the Opec+ group attempts to find a way to increase crude supplies to meet the demand arising from an easing of travel restrictions in some part of the world. But talks on how to to do this hit an impasse when the UAE made its support for a deal extension conditional on a review of production baselines. The UAE's July production quota is just 2.74mn b/d, less than 70pc of its capacity.

Abu Dhabi has invested significant sums to expand its production capacity since Opec+ was formed and today's awards show that it will continue to invest to reach its 5mn b/d target.

There is no sign of when the Opec+ group will next meet, and with the three-day Islamic festival of Eid al-Adha next week it looks likely that the alliance will go into August using the same quotas as July. The producers had hoped to boost output by 400,000 b/d. Opec+ sources have said that mediation is ongoing between the UAE and other members of the group, but that this is far from reaching a compromise.

By Adal Mirza