ABU DHABI - Production Costs.

Aggregate oil production and operating costs up to the loading terminal, for both onshore and offshore crudes, are believed to average about $2.5/b, up from less than $2/b in early 2003. But this is still among the lowest in the world and less than half the average costs in Dubai. Extraction rates, reservoir engineering and field maintenance work in Abu Dhabi probably are the best in the Middle East, thanks to the technical capabilities of ADNOC's partners. Other Middle East NOCs seek ADNOC's help on some technical matters. Over $8 bn being spent on production capacity expansions and EOR systems since 2003 have included an outlay for anti-corrosion works for 1,311 onshore wells operated by ADCO. Offshore, ADMA-OPCO is having a major platform built for 600 MCF/d of gas to be injected into the oilfields to maintain wellhead pressure.

A reduction of operating costs under austerity plans introduced since 1985 brought the net well-head cost average for oil produced in Abu Dhabi in the early 1990s to less than 68 cents/b. This was the unit cost estimated in the early 1990s for capacity expansions by OPEC members. To compare, the unit costs for capacity expansion then were estimated at 63 cents/b for Qatar, 39 cents for Kuwait (before Iraq's invasion), 23 cents for Iraq, 75 cents for Iran, 73 cents for Libya, $2.80 for Algeria, and $5.41 for Nigeria.

Operating costs had decreased substantially since 1987 after the departure of Algerian executives from ADNOC. Led by Mahmoud Hamra-Krouha, once a key man in Sonatrach of Algeria, the Algerians were said to be more doctrinaire and less business-minded than their Abu Dhabian counterparts.

Despite the relatively small number of exploratory wells drilled compared to the size of the territory, drilling in Abu Dhabi is at a mature stage. But seismic activity is maintained. The success rate - in terms of finding developable fields in Abu Dhabi - is about 1 in 3. Geological understanding of the petroleum habitat has reached a point where play fairways are reliably identified, with the main plays recognised and tested. It is assumed, therefore, that the chances of finding new giants in Abu Dhabi are low (see geological profile in Gas Market Trends 1). Territorial water depths seldom exceed 40 metres. Even the smallest fields could be developed by offshore loading. The maximum distance to an existing facility on landfall is unlikely to exceed 40 km.