If there were any doubts about the scale of the business opportunities offered by energy transition within the oil and gas sector, the imminent award in Abu Dhabi of a multi-billion-dollar contract to supply offshore installations with shore power is about to put them to rest.

A grouping of South Korea’s Samsung C&T, Kepco Electric and France's EdF has emerged as the front runner to supply a subsea power transmission system for Abu Dhabi National Oil Company (Adnoc) aimed at driving down carbon emissions at the state-owned giant's offshore facilities.

Three people with direct knowledge of the development told Upstream the consortium is well-positioned to secure a money-spinning contract for what is known as the Lightning project.

The project was conceived as a means for developing and operating the region’s first high-voltage, direct current (HVDC) subsea transmission system to connect Adnoc’s offshore production facilities to Abu Dhabi Power Corporation (ADPower)'s onshore electricity grid.

While the Samsung-Kepco-EDF consortium is described as the preferred contractor for the coveted project, Adnoc is yet to make a formal announcement.

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The consortium has edged out three other contracting groups in the tender process, Upstream understands.

These include a pairing of China’s Offshore Oil Engineering Company (COOEC) with compatriot China Southern Power Grid Company, a consortium of UK-headquartered Petrofac with Belgian player Elia, and a consortium of Indian engineering giant Larsen & Toubro and Japan’s Kansai Electric.

The tender process for the subsea transmission project was initiated last year by Adnoc and compatriot ADPower but its progress has been hindered by low crude prices and the coronavirus pandemic.

Adnoc is now expected to sign the contract for the Lightning project soon, on the back of improved market fundamentals and higher oil and gas prices, according to sources. The company is yet to respond to a query on the subsea transmission project's tender process.

Production push

Reducing the carbon intensity at its offshore operations is a key focus for Abu Dhabi as the emirate aims to increase its oil output capacity to 5 million barrels per day by 2030, from the current level of about 4 million bpd.

Environmentalists say that projects aimed at reducing the carbon intensity of oil and gas production — even on the scale of Adnoc's proposed electrification project — fail to address the underlying problem of climate warming, especially if they are used to underpin higher production of fossil fuels.

Adnoc says its HVDC subsea power transmission project is expected to reduce the overall carbon footprint of the company's offshore production facilities by up to 30%, but statements about the project have not yet made the basis of comparison clear.

The transmission system will comprise two independent subsea HVDC transmission links and converter stations that will connect to ADPower’s onshore electricity grid and provide a total installed capacity of 3200 megawatts, Adnoc earlier said.

Volt of confidence: Abu Dhabi National Oil Company looks set to hand out a massive award for a power-from-shore project that will cut emissions at its offshore platforms — and prove to contractors that there's money to be made in energy transition. Photo: Cartoon UPSTREAM/RYTIS DAUKANTAS

The Lightning project will be “replacing the existing offshore localised gas turbine generators with diverse, more efficient and environmentally sustainable sources of energy, including renewable and nuclear power”. Adnoc has stated in the past that the HVDC transmission system will drive operational efficiencies as well as system reliability through ADPower’s onshore power grid supply, and support Adnoc's strategic objective to remain one of the world’s lowest-cost and lowest-emitting oil producers.

By allowing the company to redirect gas that is currently used to power offshore facilities, Adnoc also expects to boost sales revenues.

Last year, Yaser Saeed al Mazrouei, Adnoc's upstream executive director, said the project "will meet its future offshore power needs, even as the fields mature, using diverse and sustainable sources". The preferred contractor will be responsible for developing the project on a build, own, operate and transfer (BOOT) basis, a model that is now increasingly being followed by state-owned companies in the region.

The project is likely to be operational by 2025 and will be funded through a special-purpose vehicle jointly owned by Adnoc and ADPower with 30% apiece, and the selected developers and investors with 40%, Adnoc said last year.

One source suggested the full scope of the project could be worth more than $3 billion, but this could not be confirmed.

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