Conoco to push on with UAE sour gas project

ABU DHABI Nov 3 (Reuters) - U.S. ConocoPhillips (COP.N) is pressing ahead with its multi-billion dollar project to develop a sour gas field in the United Arab Emirates, despite turmoil in global financial markets, a senior executive said on Monday.

"Yes we are going forward with the project," Ryan Lance, the company's president of exploration and production in Europe, Asia, Africa and the Middle East, told Reuters on the sidelines of a petroleum conference in Abu Dhabi.

Industry sources have estimated the cost of the project to produce sour gas from the UAE's Shah field at over $10 billion. Lance declined to give Conoco's own estimate for the cost.

The gas at Shah has a content of around 30 percent of deadly hydrogen sulphide, making it tougher to produce than conventional gas reserves.

The initial engineering and design (FEED) for the project should be completed in early 2009, Lance told reporters at the conference.

Fluor (FLR.N) was doing the initial engineering and design study, an industry source said. Once completed, the project would be broken down into several packages for engineering and construction.

Conoco has already had a preliminary meeting with companies that are interested in bidding for the construction packages, the source said.

Conoco is expected to take a 40 percent stake in the project, while UAE state oil firm Abu Dhabi National Oil Company (ADNOC) would hold the rest.

The UAE holds the world's fifth-largest gas reserves at nearly 214 trillion cubic feet, much of it sour.

Record oil revenues have fuelled economic expansion and rapidly rising demand for gas from both the power sector and the Gulf Arab state's growing heavy industry.

Domestic gas supply continues to trail demand, with the UAE importing around 2 billion cubic feet per day (cfd) from Qatar to plug this gap.

As it seeks to ramp up supplies, the UAE is also planning to develop fields that it may in the past were seen to be complex and uneconomic.

(Reporting by Luke Pachymuthu and Simon Webb; editing by William Hardy)