Abu Dhabi National Oil Company (Adnoc) and Royal Dutch Shell have signed a preliminary agreement to explore offshore for gas in Abu Dhabi in a development that could unlock significant new fuel supplies for the Gulf region’s burgeoning industrial and power sectors.

If finalised, the deal would be Shell’s first in decades in the UAE’s upstream oil and gas industry. It could also signify an important shift in government energy policy towards a greater degree of collaboration with foreign partners.

Indeed, foreign partnership has in the past been relatively limited – though The Linde Group succeeded where others failed as it established a joint venture deal with partnership the Borealis/Adnoc joint venture Borouge.

An example of both foreign partnership in the Middle East and a strong foothold for Linde in this expanding region, the company nailed down the major strategic partnership in December 2007.

The long-standing engineering cooperation with the joint venture Borouge, for which Linde is currently building a $1.3bn ethane cracking plant, led to a 49:51 joint venture agreement with Adnoc. The new company trading as Elixier will supply gas users throughout Abu Dhabi.

The deal opened-up a number of opportunities for the group in the region, as revealed in the gasworld Interview of the Month with Dr Aldo Belloni and Wolfgang Reitzle earlier this year.

Developing energy supplies
The newly announced Adnoc-Shell agreement may also amount to an admission by state-owned Adnoc that it needs to do more to develop energy supplies to satisfy surging domestic and regional needs.

It’s thought that Abu Dhabi’s deep offshore gas deposits, if they existed, were most likely to be ‘tight gas’ locked in fine-grained rock formations. Producing tight gas is one of Shell’s technical specialities. In the Gulf region, the company is involved in such projects in Oman.

Shell’s most recent energy forecasts show that by 2035, the Middle East’s annual energy demand could be 130% higher than in 2000, when the region consumed the equivalent of 8 million barrels per day of oil.

Without significant investment in new gas projects, the region’s energy crunch is likely to worsen, many believe. Furthermore, without international cooperation to stimulate oil & gas development worldwide, another upwards spike in oil prices could quickly emerge when the global economy recovered, it is suggested.