BMI View: ADNOC and its foreign partners have announced positive test results from an unconve n tional well. The low sulphur content of the gas, in contrast to the sour nature of current reserves , means potential benefits for the UAE are significant . While we have not yet included any contribution from tight gas in our foreca s ts for the UAE, we highlight that the participation of technically experienced IOCs in the country bodes well for the eventual recovery of these resources.
Abu Dhabi National Oil Company (ADNOC) reported positive results from the country's first tight gas appraisal well to a conference the Petroleum Exhibition and Conference in Abu Dhabi on November 13 2012. The well tested the Diyab formation in Abu Dhabi - a tight carbonate reservoir - and indicated that potentially commercial gas flows could be drawn from the dense rock. In the past, conventional drilling ha s failed to stimulate hydrocarbon production from the formation, suggesting that hydraulic fracturing (fraccing) by ADNOC could unlock the UAE's tight gas deposits.
Successful flows at Diyab are promising for a number of reasons; the first is that current data indicate that much of the UAE's tight gas may be low in sulphur. G as production in the UAE has been challenging due to the poor quality and sour nature of current reserves, which has led to project delays, increased costs, and drastically reduced the amount of marketable gas available after extensive processing. For example a key project to raise gas output in the UAE is the development of the sulphur - rich Shah gas field, which will produce 28mn cubic meters of per day (M cm/d) of raw gas; h owever, after extensive processing only 14Mcm/d will be available for consumption.
Consequently, the high quality of the gas presents significant upside potential to the UAE ' ' s gas output . Moreover the carbonate reservoirs in which the discovered gas is contained are widespread in the UAE and the wider Persian Gulf, though their low porosity had made it the main obstacle to recovery through conventional drilling. A s such, the potential commercial flow rates from the UAE's Diyab test well hold upside potential for the region.
Indeed, the project's team leader, Fahad al-Ameri , reported i n i t ial results 'as encouraging,' and said ADNOC was co n sider i ng a three - to - six well appraisal program me targeting gas in the Diyab formation , with simulation studies suggesting commercial production should be possible. Ameri went further in stating 'non-conve n tional rese r voirs could have a huge impact' on the 'hydrocarbons sector in the next few years' in Abu Dhabi.
While our forecast s antic i pate gas production in the UAE will increase from 53.1bcm in 2012, to 73.7bcm by 2021, we believe that rising consumption will necessitate a continued reliance on imports both via pipeline and in the form of l iqu e fied n atural g as (LNG) - to mee t domestic demand and ensure export com m itments are not threatened. Given that exploration for tight gas reserves is at a very early stage we have not included any contrib u tion to our current forecasts to 2021 ; however , we highlight that there is strong upside potential if commercial produ c tion i s achieved.
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Tight Gas Flows Hold Upside Potential For The Region
ADNOC is not alone in its tight gas quest; its partners at the initial appraisal well include BP, ExxonMobil, Royal Dutch Shell, Total and Partex. The strong presence of technically experienced foreign partners with proven track records in unconventional extraction bodes well for the UAE's appraisal campaign. We have long held that the participation of experienced foreign partners will be key to efforts to tap unconventional reserves. This will be particularly true for the UAE, where the quality of reservoirs will make commercial recovery even more difficult than in the US - with the shale gas boom in the States having encouraged many countries to assess their own tight gas potential.
Further supporting the development of the UAE's unconventional potential is the presence of a service industry, with Halliburton, Petrofac, Schlumberger, Baker Hughes well established in the country's oil and gas sector. The UAE's relative openness to foreign participation in developing its hydrocarbons reserves strengthens the prospect of eventual unconventional gas production.
Growth in the domestic production of natural gas has grown in importance since the UAE became a net importer of natural gas in 2007 on the back of rising domestic consumption; a trend our forecasts show will continue to place pressure on existing supplies. Raising domestic output could benefit the region by demonstrating that commercial recovery is possible and could also leave more gas (currently imported from Qatar) for consumption by other Gulf importers, or for export to more lucrative markets in Asia.
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