Adnoc Cancels $1.65bn Sour Gas Contracts

The UAE's Abu Dhabi National Oil Co (Adnoc) has scrapped contracts it awarded to the UK oilfield services provider Petrofac for the Dalma gas project two months ago, Petrofac said on April 16.

The two contracts, worth $1.65bn, covered engineering, procurement, construction, transportation, offshore installation and commissioning work at Arzanah island and surrounding offshore fields. One of them was issued to Petrofac's joint venture with Malaysia's SapuraKencana. The UK firm's share of the awards is $1.5bn.

Petrofac did not give a reason for the contracts' cancellation. While Adnoc is yet to announce spending cuts in response to the catastrophic collapse in oil prices, many of the international and national oil companies have, with Saudi Aramco lowering its capex guidance for 2020 to $25-30bn from $35-40bn.

Dalma is within the Ghasha ultra-sour gas concession, a project which the UAE is banking on to help achieve its goal of becoming gas self-sufficient. 

"Petrofac is committed to working with Adnoc over the coming weeks to explore alternative options to deliver this project in a way that supports their strategic objectives within the current challenging environment," the contractor said.

The company said it continues to execute the rest of its order backlog worth $7bn as planned, and is still moving forward with tendering for major contracts in Abu Dhabi. However, the timing of awards may be affected by the contract terminations, it said.