UAE not worried as Shell quits Bab gas project in falling market

Move to give country flexibility to ‘get the cheapest gas we can get,’ minister says

The UAE’s energy minister said yesterday the Emirates was not worried about Royal Dutch Shell’s pullout from the joint Bab sour gas field project in Abu Dhabi.

“We are not worried about the supply of gas at this stage,” Suhail Al Mazroui, UAE Minister of Energy, on the sidelines of the World Future Energy Summit.

“We are planning not worried.”

“The reason most probably [behind Shell pulling out] is going to be commercial because now the price of gas — LNG — has dropped more than 50 per cent,” said Al Mazroui.

“That’s probably the reason. Developing a more expensive solution is not going to be viable at this time but it’s also good news for us because we dont want to develop gas that is more expensive than the gas we can import.”

The minister said Adnoc is still committed to producing gas, saying the move by Shell will give the UAE flexibility to get “the cheapest gas we can get”.

He also said the UAE will continue to import gas for now while it works on several ideas and projects. He said the expansion of Dolphin will increase gas productivity as well.

Royal Dutch Shell said yesterday it had decided to exit

well. I’m the multibillion dollar plan to jointly develop the Bab sour gasfield in Abu Dhabi, citing the downturn in the oil market.

The Anglo-Dutch company said that “following a careful and thorough evaluation of technical challenges and costs” it will stop further joint work on the project with the Abu Dhabi National Oil Co. (Adnoc).

The reason most probably [behind Shell pulling out] is going to be commercial because now the price of gas - LNG - has dropped more than 50 per cent. That’s probably the reason. Developing a more expensive solution is not going to be viable at this time but it’s also good news for us because we don’t want to develop gas that is more expensive than the gas we can import.”

Suhail Al Mazroui

| UAE’s Minister of Energy

30-year venture

Shell won in 2013 a tender that was valued at the time at $10 billion (Dh 36.7 billion) to develop over a 30-year venture the complex sour gasfield that involves treating potentially deadly gasses.

The joint venture was also seen at the time as a stepping stone for Shell to renew a coveted concession to develop the United Arab Emirates’ largest onshore oilfield.

The Bab sour joint venture envisaged the construction of a 1 billion cubic feet sour gas processing plant for domestic market consumption.

“The evaluation concluded that for Shell, the development of the project does not fit with the company’s strategy, particularly in the economic climate prevailing in the energy industry,” Shell said in a statement yesterday.

Adnoc was expected to hold 60 per cent of the Bab sour gas project, while Shell would have held 40 per cent.