Adnoc Review 2016

Tillerson ... decision in three years

Tillerson ... decision in three years

No decision on UZ expansion: Exxon

Boosting capacity at Upper Zakum to 1 mbpd is central to Abu Dhabi’s plans to increase production capacity to 3.8 mbpd by around 2024

Exxonmobil won’t decide before 2019 whether to join Abu Dhabi National Oil Co (Adnoc) in hoisting output from Abu Dhabi’s giant offshore Upper Zakum (UZ) oil field beyond the existing target of 750,000 barrels per day, the US supermajor’s top executive says.

The Zakum Development Co, a consortium of Exxon, Adnoc and Japan’s Inpex, is currently working to raise production capacity at the 50 billion barrel field to 750,000 bpd by 2018 from about 600,000 bpd now. Adnoc says it wants to continue expanding the field to 1 mbpd under its so-called "UZ 1000" project, but its partners have yet to commit to the next expansion phase.

"That’s a decision we have agreed we will take in two to three years when we see how the current projects are performing," Exxon chief executive Rex Tillerson says.

Boosting capacity at Upper Zakum to 1 mbpd is central to Abu Dhabi’s plans to increase production capacity to 3.8 mbpd by around 2024, above the 3.5 mbpd target set for 2019. Adnoc has previously says it will proceed with UZ 1000 even if its partners choose not to.

Inpex says that it would like to contribute to raising the production target further, but the program was being studied by Exxon.

The US supermajor, which joined the Upper Zakum project in 2006, won revised terms to its contract in 2014, which included an extension out until 2041 and improved commercial terms.

Abu Dhabi, holder of almost all the UAE’ oil and gas reserves, remains committed to boosting production capacity even though sub-$50 per barrel prices are prompting many other producers and oil companies to rethink investment strategies.

Tillerson says future investment in the Middle East will depend on their attractiveness.

"It’s just a question of opportunity. In the Middle East, many of those countries are not open for foreign investment and some are, so it’s just a question of the attractiveness of it," he says.

Exxon declined to submit a compliant bid in 2013 for Abu Dhabi’s 1.6 mbpd onshore assets, as the commercial terms and the operating structure were not attractive. Prices at the time were still around the $100 mark.




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