Oil production is an important part of the economy in the United Arab Emirates: it accounts for just over 30% of GDP, according to the Abu Dhabi Statistics Center (SCAD). Because of this, new projects in the oil sector are always welcome. Just this year, Cosmo Abu Dhabi Energy Exploration & Production Co. and oil and gas company Cespa produced the first oil from the Hail Field offshore, Abu Dhabi. The Hail Oil Field now joins a long line of success stories in the lucrative world of oil exploration and production in the UAE.
Before Hail Field produced output, it was put into production by the Abu Dhabi Oil Company (ADOC): a major shareholder of ADOC with a stake of 64.4. The companies working on the project share a 20/80 stake split: Cepsa holds a 20 percent stake in Cosmo Abu Dhabi Energy Exploration & Production Co. Ltd whilst the other 80 percent interest belongs to Cosmo Oil.
Hail is the fourth offshore crude oil field to start production in the ADOC concession, alongside the Mubarraz field, Umm Al-Anbar field and Neewat Al- Ghalan fields, which commenced output in 1973, 1989 and 1995, respectively. All fields have been successfully located by the shallow waters to the West of Abu Dhabi.
Cespa have recently released a statement suggesting that Hail Field will lead to a ‘significant’ increase in production levels in the West Abu Dhabi area. Indeed, a full-years production at the Hail Oil Field in FY2018 should lead to an increase of about 50% in the Cosmo Energy Group’s overall production volume from the three operating companies compared to that of FY2016.
The Hail Field journey seems to have been well worth the wait. In 2012, Hail oil field was first acquired back with Cosmo Abu Dhabi following the signing of a new 30-year concession agreement with ADOC. Progress has been steady, and success has followed.
Early on, the operators carried out a 3D seismic survey along with appraisal activities to study the development of the field following the acquisition.
Then, construction began. Works on the island included the implementation of a 350m sheet pile quay wall, pavement slabs and mooring bollards, as well as the installation of navigational buoys and a heliport.
In addition, the construction of surface facilities, the drilling of ten production wells and the installation of three subsea pipelines to connect the Hail surface facilities with the existing production facilities at the Mubarraz field have been carried out.
The work could not have been completed without the assistance of contractors.
Mott MacDonald was awarded the first phase contract for Hail at the end of 2013, which included construction of an artificial island, a feature of offshore oilfield development in Abu Dhabi’s shallow waters.
In addition, a Spanish construction company Técnicas Reunidas won a $310m contract to bring the field to first production in 20 months, which would help Cosmo and Cespa meet the target for first oil: and they did. Oil is now being extracted from the Thamama Zone A, B and F reservoirs of the Hail field.
Financing has also been of huge assistance. The oil field project has been supported with financing from a JBIC loan, Mizuho Bank, The Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation (who have lent a further amount of money to bring the total financing to US$630,). Broken down by time, JBIC signed a $2.1 billion facility agreement with Abu Dhabi National Oil Company in January. The co-financing then followed, with Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation, Mizuho Bank, Mitsubishi UFJ Trust and Banking Corporation, Citibank Japan, Sompo Japan Nipponkoa Insurance and Sumitomo Mitsui Trust Bank, following suit. Their loans brought the overall finance total to $3.3bn.
With funding secured, and construction and contracting underway, early production could begin in November 2017. Already, the preliminary phase can reach a peak oil production rate of 21,000 barrels per day (bpd). Now, additional gas injection and gas lift operations are being planned, which should further enhance the rate of oil recovery. Furthermore, full field development activities have been put in place to increase the current production at safe, secure rates for a period of 30 years.
The project appears to be exhibiting favourable profit prospects. Cosmo said that the Hail Project will contribute around 20 percent of this business year’s projected 26-billion-yen profit from upstream business, according to the Senior Executive Officer Kenichi Taki told reporters during an earnings conference.
Although profit is one important measurement of Hail Field’s success, the project has also become beneficial across borders, countries and cultures. The project marks the first oil field development by a Japanese operator in the Middle East in six years. A stable supply of energy is critical for resource-poor Japan, which heavily relies on imports. This is why the Cosmo Energy Group has built strong relationships with Middle East oil producing countries from an early stage. The group released a statement which explained that:
“Especially with the Emirates of Abu Dhabi, the United Arab Emirates(UAE), we have built strong relationships of trust for about 50 years, starting before the foundation of the UAE, by maintaining stable production in addition to environmental preservation activities and education.”
Therefore, Hail Oil Field work is benefitting areas of the world where resources are scarcer, adding to their daily lives, to jobs, and to their countries’ economies.