The era of easy oil is over, a senior Adnoc official said yesterday as the national oil company hinted at a postponement in the drive to reach 3.5 million barrels of daily oil output. The Abu Dhabi National Oil Company (Adnoc) has well-established plans to raise its daily production capacity from the present 2.8 million barrels with expanded drilling and new facilities at several reservoirs, but the target has already slipped several times. "We are approaching peak easy oil," Abdulla Nasser al Suweidi, the deputy chief executive of Adnoc, told an audience of oil executives in the capital, adding that the industry as a whole needed to improve its management of reservoirs and increase the use of advanced technology to boost production. In 2005, Mohammed bin Dha'en al Hamli, the Energy Minister, said the nation would reach 3.5 million bpd in "the next few years" and as recently as August the Department of Planning and Economy said the Government was hoping to reach that level in 2010. Asked by reporters at the Abu Dhabi International Petroleum Exhibition and Conference about the target of 3.5 million bpd, Mr Suweidi said: "That's in 10 years". He did not go into the reasons for the postponement, but he noted that the recent dip in oil prices and slowing global economy were encouraging the company to seek ways to cut costs on its multi-billion dollar expansion projects. Oil was trading at $66 a barrel yesterday, less than half the price level only four months ago. "Where we can wait, we'll wait," Mr Suweidi said on the sidelines of the conference. "But our main objectives and plans are not affected because of the need to sustain our production and go ahead with it. "There could be some slowdown with the upfront work and engineering, but not with the projects as a whole."Adnoc was currently producing 2.3 million bpd, he said, in line with a recent agreement by Opec to trim output in the face of slumping demand because of the global economic slowdown. International partners of Adnoc have been reluctant to provide the billions of dollars in new investments because the 75-year-old concessions that govern the industry are due to expire in the next few years. Foreign investors are lobbying to have these concessions renewed. The first expansion project to come online, in 2013 or 2014, will be the offshore Integrated Gas Development, followed closely by the onshore Sahil-Asab-Shah project, according to Ali al Shamsi, the company's onshore division manager. He saic the integrated gas development would unlock 1 billion cubic feet of natural gas, which would be used mainly to fire Adnoc's own power stations. Mr Suweidi said Adnoc now produced between 5 billion and 6 billion cubic feet of gas per day, of which a little over 2 billion cubic feet was re-injected into oil reservoirs to increase well pressure. Growing requirements to artificially increase the pressure in reservoirs and other geological complexities would mean that recent increases in operating costs may not go away, industry officials said. "I think the days of cheap oil really have ended," said Marianne Kah, the chief economist of ConocoPhillips, the American energy company which is engaged in final talks with Adnoc over a $10bn gas contract. Ms Kah predicted that energy prices would remain high over the long term, but "higher oil prices will not necessarily be indicative of oil price profitability" due to a structural change in the cost of finding and producing oil in increasingly challenging environments. In an overview of prospects for global energy until 2030, she said energy producers attempting to sustain sufficient output to meet long-term demand could face a range of problems arising from falling oil demand and prices, combined with a weakening near-term outlook for global economic growth. "Will investors have the will to keep investing in the types of energy we will need in 2030? There is a big doubt in my mind," she said. "Will governments have the will to stay the course?" tcarlisle@thenational.ae cstanton@thenational.ae
