UAE - Dubai - ENOC Invests Overseas.

ENOC in 1998 bought a stake in Dragon Oil of Ireland and later raised this to 69.4%. Dragon has moved its base from Dublin to Dubai and has closed two offices in the UK.

In Turkmenistan Dragon operates the offshore Cheleken II concession. This has two oilfields, Lam and Zhdanov, whose output has been raised from 15,000 b/d to 20,000 b/d. Efforts to raise the output to 50,000 b/d are yet to materialise. According to ENOC's CEO Hussein Sultan who is also chairman of the Irish company, Dragon will eventually have a capacity of 90,000 b/d. This was the nominal capacity of the two fields several years ago.

Sharjah: A gas-prone emirate, Sharjah produces about 4,000 b/d of oil (down from 5,000 b/d in mid-1998), 40,000 b/d of condensate (down from 55,000 b/d in the first half of 1998 and 62,000 b/d in 1997) and about 800 MCF/d of gas (from 950 MCF/d in the first half of 1998). A part of the gas is exported to Dubai, with some sold to the Emirates General Petroleum Corp. (Emarat) for distribution to other northern UAE emirates.

The main E&P operator, BP Sharjah, produces 650 MCF/d of gas (down from 800 MCF/d in the first half of 1998) and 30,000 b/d of condensate (down from 50,000 b/d) from three onshore fields: Sajaa, Moveyeid and Kahaif.

Buttes Gas & Oil International (a unit of Sharjah-based Crescent Petroleum Co.) produces 4,000 b/d of oil (from 5,000 b/d in 1H98), 10,000 b/d of condensate (down from 12,000 b/d) and 150 MCF/d of associated gas (up from 100 MCF/d in 1H98) from the offshore Mubarak field, near the disputed island of Abu Musa now controlled by Iran.

Exploration efforts by both companies have not resulted in a major oil discovery, but Crescent has found a major gas field in Sharjah. BP's onshore gas fields, acquired when it absorbed Amoco in 1999, are rich in condensate. Sharjah has a small continental shelf limiting its offshore prospects.

In April 1993, Tehran issued a law setting Iran's maritime borders at 12 nautical miles and asserting its sovereignty over several islands in the Gulf and the Sea of Oman. The UAE protested as these included the islands of Abu Musa, Greater Tunb and Lesser Tunb and their territorial waters are claimed by the emirates of Sharjah, Umm al-Quwain and Ajman for Abu Musa; and Ajman, Umm al-Quwain and Ras al-Khaimah for the Tunbs. By May 1992, Iranian troops had effectively assumed control over the three islands. Despite repeated protests by the UAE and the GCC, Iran has been adamant about its own claims and has refused to cede or share control over the islands.

Mubarak field lies 10 km off Abu Musa and has been producing gas-rich oil since mid-1974. Under arrangements negotiated with Iran's Pahlavi regime in the 1960s, oil production from Mubarak was to be shared equally by Sharjah and Iran. The income from this oil was to be shared also by Umm al-Quwain and Ajman.

There is no formal petroleum law in Sharjah. In 1968, three years before the UAE was created, each of the emirates of Sharjah, Ajman and Umm al-Quwain issued an identical Income Tax Decree setting a 50% tax on net profits from oil that was to be produced offshore and a 12.5% royalty. At the time, Buttes Gas & Oil negotiated a concession which included the territorial waters of Abu Musa. Sharjah later raised the oil tax to 55%.

Buttes began studying the offshore area in 1968 on the basis of a protocol signed with the ruler of Sharjah. On Dec. 29, 1969, the company and the ruler signed a 40-year concession covering that area. Buttes was then leading a consortium called Crescent Petroleum Co. (CPC) in partnership with Clayco Petroleum Corp. Under the agreement, the company was committed to bonus payments of $2m within 30 days, $1.3m within 30 days after a commercial oil discovery, $1.75m within 30 days after regular oil exports were to reach 100,000 b/d for 30 consecutive days, $3m within 30 days after exports were to reach 200,000 b/d for 30 consecutive days, $4m within 30 days after exports were to reach 300,000 b/d, and so forth.

Exploration was to begin within three months of the deal's signing date, and initial geophysical work was to be completed within ten months. A test well was to commence within 12 months to a minimum depth of 12,000 feet, irrespective of the results of the seismic survey. The company was to spend at least $400,000 in the first year, $1.5m in the second year, $1.5m in the third year and $2m in the fourth year.

Mubarak was found east of Abu Musa island in 1972. The oilfield, 8x5 km, is in L, M and U Cretaceous Fms. The final discovery well tested 14,000 b/d of 35-45 deg. oils and 30 MCF/d of gas from four zones in Ilam and Mishrif carbonates. The earlier wells Mubarak A-2 tested 50,000 b/d and Mubarak B-1 tested 31,880 b/d. These and the final discovery got the ruler to order Buttes to put the field on stream as soon as possible. Buttes was pressed to produce at the maximum rate. So the field was put on stream in mid-1974 at 60,000 b/d, while the ruler secured sharing arrangements with the leaders of Iran, Umm al-Quwain and Ajman.

Oil output was to be shared 50-50 by Sharjah and Iran. Then Sharjah had to pass on 20% of the revenue from its cut to Umm al-Quwain and 10% to Ajman, because the field lay partly under their continental shelves.

However, the field's production fell to 53,866 b/d in the second half of 1974 as Buttes encountered structural problems because of a hasty start-up and maximised production. Despite a water injection system installed, the output fell steadily to reach 28,208 b/d in 1977, 22,100 b/d in 1978, 13,500 b/d in 1979 and 5,900 b/d in 1985. Now it is producing about 4,000 b/d.

In April 1978, Sharjah raised the royalty from 12.5 to 14.5% and the income tax from 55 to 77% and made this retroactive to July 1, 1976.

Crescent (CPC) was then owned 25.7% by Buttes Gas & Oil (operator), 25% by Ashland Oil, 25% by Getty Oil, 12.5% by Kerr McGee Eastern, 10% by Cities Service, and 1.8% by Juniper Petroleum. At end-1982, Buttes raised its CPC stake to 98.2%. But Buttes sold all its equity in mid-1985 to CPC's then CEO, Iraqi-born Hamid Ja'far who now has a UAE nationality.

A few months later Ja'far farmed out a 15% share to Neste Oy of Finland. In February 1986, the two signed a joint farm-in agreement with Intoil of Bahrain giving it 7.5%, which reduced Ja'far's stake to 80% and that of Neste to 12.5%. In return, Intoil was to finance its share of a new 10-year development and secondary EOR programme, involving about $100m, to raise the field's capacity from 5,000 b/d to 20,000 b/d for both oil and Thamama condensate.

The plan was to raise the field's gas production capacity to 100 MCF/d. The target for gas was reached in late 1992, with deliveries started in early 1993. A further increase in gas extraction in the subsequent years enabled CPC to raise production to 150 MCF/d in 1999 and this level has been maintained until now. All the output has been exported to Dubai's Jebel Ali free zone though a 16-inch, 90-km line from the field's production and processing platform. Now CPC's condensate production is averaging 10,000 b/d. The oil and condensate are pumped to a floating storage unit. (CPC's production was interrupted in April 1988, after an Iranian seaborne attack as part of the war between Iran and Iraq, when the US Navy hit Iran's naval forces in the southern Gulf. Production was resumed two months later).

In June 1996, Enterprise Oil of the UK (now part of Shell) signed a deal with CPC to develop the lower and middle Ilam and Mishrif Fms at Mubarak. It was to spend $25m within 18 months on a 3D seismic survey and at least two wells by end-1997. In return, Enterprise was to have 40% of production from any of the wells it drilled. The deal entitled CPC to explore only Mubarak's upper oil and gas bearing Ilam and Mishrif Fms. By then, Mubarak had produced 83m barrels of oil.

On Feb. 25, 1997, a 40% stake in Buttes Gas & Oil was sold to the Chinese Petroleum Corp. (CPC)of Taiwan and the latter paid about $75m for this. The farm out allowed CPC to launch a new multi-well development and exploration programme.

In November 1997 the local government gave a concession, called Hamriyah-2, to a partnership of CPC (operator) and Atlantis Holdings of Norway, with seismic work started in December 1997. CPC's exploration work led to a small gas find in a horizontal Sharjah-1 well (40 km off Sharjah's northern coast) in August 1999. In late 1999, a horizontal Sharjah-2 well (1 km w of Sharjah-1) tested up to 50 MCF/d of gas and 150 b/d of condensate and some oil in Ilam/Mishrif and Thamama Fms, through a controlled choke. CPC's CEO Ja'far described the find as one of the biggest gas fields yet discovered in Sharjah. Later he estimated its recoverable gas reserves at 1 TCF. In February 2003 Atlantis was acquired by Sinochem of China.