Eni going ahead with Sharjah gas project despite COVID-19, capex cuts: UAE's SNOC

Eni is going ahead with a gas project in the UAE's third largest emirate despite COVID-19 and the Italian company's capital expenditures and cost cuts, the CEO of state-owned Sharjah National Oil Corp., or SNOC, told S&P Global Platts.

Eni is a partner with SNOC in Block B in Sharjah, where it discovered the Mahani reservoir, with the first drilled well achieving flow rates of up to 50 MMcf/d of lean gas and associated condensate, SNOC and Eni said in January. Sharjah is one of the seven emirates that forms the UAE.

"We have not seen any impact from Eni on the financing of their share of the development," said Hatem al-Mosa. "Since that discovery, we have been moving with our plans to bring the well on stream while making plans for delineating the discovered reservoir and finding out how big it is."

Capex cuts

Eni announced on July 20 capital spending cuts of Eur2.6 billion ($3.1 billion), mainly in its upstream business, due to the collapse in oil prices and the impact of the coronavirus pandemic.

Eni's planned capital spending is about 35% lower than its original budget for 2020 and 30% lower for 2021, with Eur2.4 billion in anticipated cuts next year. The curtailments are "almost fully focused on the E&P segment," Eni said at the time.

CEO Claudio Descalzi said operational cost cutting of Eur1.4 billion both this year and next will also put the company in better shape, given "great signs of uncertainty still to come."

Three blocks

Eni holds a 50% stake in the onshore Block B, with SNOC holding the remaining 50% and acting as the operator. The Italian company also is the operator of Blocks A and C, with a 75% participating interest alongside SNOC as a partner with a 25% stake. All three blocks were awarded to Eni in 2019 in Sharjah's first international licensing round.

"The pandemic as bad as it is, it had little impact on our business in general," said Mosa.

SNOC expects production from the first drilled well in Mahani to start next year but it is unlikely to be 50 MMcf/d in 2021.

SNOC also expects to start drilling a second well next year and maybe a third well after that in Mahani.

Low-cost gas

Sharjah needs gas for power generation and its current gas fields are suffering from natural decline, Mosa said.

"We have seen even less than 5% decline in production," he said.

The emirate is not targeting gas self-sufficiency but focusing on low-cost gas. It imports power and gas to fulfill its needs and may launch a second licensing round.

Overall, UAE is boosting its gas production and has made another major discovery this year, besides Mahani in Sharjah.

Abu Dhabi National Oil Co, UAE's biggest energy company, and Dubai's gas supplier will develop a new shallow gas reservoir with estimated in-place gas resources of 80 Tcf that was discovered along the Dubai-Abu Dhabi border.

Source: SP Global

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