DUBAI (Reuters) – At least five international energy companies submitted bids on Sunday for a giant sour gas project in the United Arab Emirates that could be have a price tag as high as $10 billion.
The project is one of the largest open to oil and gas companies competing for limited access to the Middle East’s energy reserves. Saudi Arabia keeps the world’s biggest oil reserves closed to international firms, while gas exporter Qatar has a moratorium on new projects.
“This is the largest gas development in the region in terms of gross production,” said Colin Lothian, senior analyst for the Middle East at global consultancy Wood Mackenzie.
“It is also one of the biggest projects available for participation of international companies. The successful bidder will look forward to a long-term role in the future of Abu Dhabi’s gas development.”
BP and Royal Dutch Shell said on Sunday, the last day for submission, that they had bid. France’s Total, ConocoPhillips and the U.S.’s Occidental Petroleum Corp. were also in the running, industry sources said.
ADNOC had invited bids from several other companies including BG Group, Chevron, Eni, Exxon Mobil, Japan Oil Development Co, and German chemical company BASF subsidiary Wintershall. It was unclear on Sunday which of these companies had bid.
The winner would take a 40 percent stake in the project, with state-run Abu Dhabi National Oil Company (ADNOC) taking the rest. The project was expected to have gross gas production of around 3 billion cubic feet per day and analysts estimate investment in the project could total $10 billion.
The sour gas in the UAE’s Shah and Bab fields, with a content of around 30 percent of deadly hydrogen sulphide, is tougher to produce than sweeter gas reserves.
“The project brings with it some very difficult technical and commercial challenges,” Lothian said.
Net gas production from the project after the hydrogen sulphide and other contaminants were stripped out was expected to be well over a billion cubic feet per day.
The UAE holds the world’s fifth largest gas reserves at over 200 trillion cubic feet, and needs to develop them to meet soaring domestic demand. Like its Gulf Arab neighbors, the UAE is facing rising energy needs as record oil revenues fuel economic expansion.
With the exception of Qatar, Gulf Arab countries are short of gas supplies, forcing them to target more difficult deposits as they look to meet demand.
BP signed a deal in January to develop tight gas fields in Oman. Tight gas is in complex geological formations and is difficult to extract.
The emirate of Abu Dhabi, the capital of the UAE, holds the majority of the OPEC producer’s oil wealth. The UAE is the world’s sixth largest oil exporter.