ABU DHABI - The LNG Business.

Abu Dhabi in 1977 was the first country in the Middle East to export gas in LNG form. The Abu Dhabi Gas Liquefaction Co. (ADGAS) had in April 1977 brought on stream a grassroots complex consisting of two LNG trains located on the isle of Das. Their capacity was raised by over 10% in the subsequent years to 2.3m t/y of LNG and 1.3m t/y of LPG. Most of the gas fed to the complex at the time was associated with offshore oil production and it was rich in propane and butane.

The two trains were debottlenecked in 1988 and their capacity was raised to 2.6m t/y. By then, the complex had begun receiving non-associated gas developed from a Khuff reservoir at Umm Shaif. A third 2.3m t/y LNG train came on stream in late 1994, which brought the nominal capacity of the complex to 4.9m t/y of LNG and 1.55m t/y of LPG. This output is sold mostly to Tokyo Electric Power Co. (Tepco), Japan's biggest power utility and the biggest importer of LNG in the world.

The actual output of LNG is averaging about 5.3m t/y, with the third train producing 2.7m t/y. Now ADGAS is to have the third train debottlenecked so that the LNG production capacity at the complex reaches 6m t/y by 2002, with a feasibility study on this completed in 2000. Related projects will include an upgrading of the sulphur recovery unit and installation of a third gas compressor. The latter is to tap excess boil-off gas generated from the LNG shiploading process, so that this is used in the plant's operation as fuel gas. There could be a fourth train to raise capacity to 9m t/y, if this is found feasible in the coming years.

ADGAS will have to problem selling the extra LNG. Surpluses of LNG, LPG and sulphur are sold mainly on spot basis by ADGAS. Most LNG spot shipments now go to Gaz de France, Enagas of Spain and Distrigaz of Belgium. Cabot (Distrigas) of Boston and Botas of Turkey have taken spot quantities of LNG from ADGAS in recent years. Under a deal signed in September 1998, ADGAS supplied Edison of Italy with 660,000 cubic metres in 11 shipments from last October until June 1999. ADGAS in late 1994 and in 1995/96 sold LNG to Chubu Electric Power Co. of Japan. All have taken the LNG on fob basis, with West-bound tankers owned by ADNOC or chartered by ADGAS passing through the Suez Canal and paying transit fees at a 35% discount. The spot deal with Chubu was under a special arrangement worked out with Tepco. From January 1997, Chubu began buying LNG from Qatar's Qatargas JV under a 25-year contract.

ADGAS' third train was completed in April 1994 and related facilities were completed in August that year. After test production and the overhauling of the first two trains and related facilities, the third unit came on stream in August 1994. The first shipment from it to Tepco arrived in Tokyo two months later aboard one of four tankers built in Japan. ADNOC has another four LNG tankers ordered from Kvaerner's yard in Finland.

ADGAS' was the sixth LNG plant to be built in the world, next to Arzew GL4Z (Algeria, October 1964), Kenai (Alaska, October 1969), Marsa El Brega (Libya, April 1970), Lumut (Brunei, December 1972), and Skikda GL1K (Algeria, December 1972). ADGAS was created in 1973, at the start of an oil boom which lasted until the mid-1980s. The ADGAS partners and their background are as follows:

ADNOC, 70% since July 3, 1997 when an agreement was signed raising the state-owned company's share from 51%. ADNOC is the sole owner of all reserves of natural gas. At the time when the first two trains went on stream, the gas was mostly associated with oil production in the offshore oilfields of Umm Shaif and Zakum as well as the Al Bunduq oilfield (shared equally by Abu Dhabi and Qatar and operated by UPD of Japan, with BP and TotalFinaElf as sleeping partners). ADGAS is only a downstream venture, with the upstream owned by ADNOC. This applies to the third train as well, with the gas now sold to ADGAS by ADNOC at about $0.50/m BTU. The increase in ADNOC's share from 51% had been agreed in the early 1990s when the partners decided to add a third train.

British Petroleum as project leader, 10% (reduced in 1997 from 16.33%), heading the ADMA-OPCO consortium in offshore operations, as well as the ADCO group in onshore operations. It was BP (D'Arcy's Anglo-Persian) which had first put Abu Dhabi on the world's oil map. That was before World War Two. The ADGAS general manager is a BP man in charge of the company's daily operations, with BP providing technical support. His deputy is from ADNOC. The chairman of ADGAS must be a top-ranking ADNOC representative. The first chairman was Mana Said Al Otaiba, then the UAE oil minister who personally headed most of the ADNOC ventures with foreign companies. The current chairman is Yusuf Bin Omeir Bin Yusuf, ADNOC's general manager and SPC secretary general as well as a former UAE oil minister.

TotalFinaElf, 5% (reduced in 1997 from 8.17%), being one of the partners in ADMA-OPCO, ADCO and GASCO. Since the first ADGAS experience in the 1970s, the French company has become involved in a number of gas ventures around the world. Now it is a major investor in the LNG business, being the leader in the Qatargas upstream element and a key partner in its downstream venture. It is a partner in Oman's LNG venture and leader of Yemen's LNG project. TotalFinaElf is involved in several other Abu Dhabi ventures, as well as being the operator of Abu Bukhoosh which is one of the fields providing gas to the LNG complex.

Mitsui & Co. and Mitsui Liquefied Gas, 15% (reduced in 1997 from 24.5%), brought in Tepco to buy the LNG output and most of the associated liquids. Mitsui is the main investor in Middle East LNG projects among Japanese companies, being a key partner in Qatargas and in Oman's project. Its role has been crucial to both ADGAS and Qatargas, as well as to the huge oil/LNG venture on Russia's Far Eastern island of Sakhalin.

(Oman's Shell-led LNG venture is to have a third 3.3m t/y train built to bring its capacity to 9.9m t/y by 2003).