The onshore division of United Arab Emirates state-run oil firm ADNOC plans to award around $2 billion of contracts to expand capacity before the end of the year, a top official said on Thursday. Falling construction and raw material costs have cut almost 50 percent from the cost of energy projects, Abdul Munim Al-Kindy, the general manager of ADCO, told reporters. “Definitely the (falling) cost of construction has had a positive impact,” Kindy said. “Bids have become cheap resulting in big savings for us... almost 50 percent.” Big oil suppliers in the Gulf including top oil exporter Saudi Arabia have driven down project price tags by billions of dollars as they force contractors to go back to the drawing boards with bids to factor in cheaper costs. ADCO would boost capacity by 200,000 barrels per day in 2012 to 1.6 million bpd, he said. It aims to boost output to 1.8 million bpd by 2016. The growth in onshore operations is part of a larger plant by the UAE to boost total crude production capacity to around 3.5 million bpd in 2018 from around 2.8 million bpd. ADCO expected to award deals this year for the Beda Qamzan, Qusuweira and Bab projects, Kindy said. Kindy spoke after signing a 3-year, $818 million deal with South Korea's SK Engineering & Construction Co to install gas compressor units at the Bab oil and gas field. ADCO awarded the contract in March. Initial bids for that deal had come in at around $1.5 billion, Kindy said, before the economic slowdown and the falling price of oil helped cut the cost of energy projects. Energy construction costs had soared during oil's six-year rally to last year's peaks above $147 a barrel. ADCO saved about $1 billion on deals awarded in January thanks to falling costs, Kindy said on Thursday. It awarded $3.5 billion worth of contracts then to Petrofac, Tecnicas Reunidas and Consolidated Contractors International Co. Bids were initially much higher, Kindy said. ADCO is 60 percent owned by the Abu Dhabi National Oil Company (ADNOC), BP, Royal Dutch Shell, Total and Exxon Mobil have a 9.5 percent stake each. Partex has the remaining 2 percent.
