January 20, 2011 / 11:56 AM / 8 years ago

UPDATE 3-Occidental wins stake in Abu Dhabi gas project

* Oxy gets stake in one of Middle East’s largest projects

* Sour gas project to begin output in 2014 (Adds details on Oxy’s Middle East interests)

ABU DHABI/NEW YORK, Jan 20 (Reuters) - Occidental Petroleum Corp (OXY.N) will take a 40 percent share of Abu Dhabi National Oil Company’s (ADNOC) $10 billion Shah gas project, one of the largest in the Middle East, the companies said on Thursday.

ADNOC’s selection of Occidental could make the company a world leader in high-sulphur gas production. [ID:nLDE70I15D]

The projects include processing plants with a capacity of 1 billion cubic feet of gas per day. Production, set to begin in 2014, is expected to be 500 million cubic feet per day, plus a significant amount of condensate and natural gas liquids.

U.S. major ConocoPhillips (COP.N) pulled out of Shah last April, leaving ADNOC scrambling for a partner to develop a gas field it needs to meet soaring energy demand in the UAE. [ID:nLDE63R1FP]

“This is another important step in the implementation of our growth strategy and in our relationship with the Emirate of Abu Dhabi,” Occidental Chief Executive Ray Irani said in a statement.

The deal, once finalized, would be an apt closing move for Lebanon-born Irani before he steps down in May, after two decades as CEO overseeing massive growth in the Middle East, which makes up more than a third of Oxy’s output.

The Los Angeles-based company has laid out plans to expand production in the region by between a quarter and a third in the next four years, driven by output from Iraq, so Shah will provide growth in the region beyond that. [ID:nN19243152]

Under the terms of the 30-year Shah contract, ADNOC will own the remaining 60 percent. Sources said on Wednesday that Occidental’s share was expected to be up to 40 percent, given that ADNOC usually prefers the 60-40 partnership structure.

The Shah start-up could also involve Irani, since he will stay on as executive chairman through 2014. The CEO, who made headlines over the years for his lucrative pay, hands the reins to Chief Operating Officer Stephen Chazen in May. [ID:nSGE69D0IY] (Reporting by Stanley Carvalho and Humeyra Pamuk in Abu Dhabi, Matt Daily in New York, and Braden Reddall in San Francisco; Editing by Jane Baird, Derek Caney and Bernard Orr)

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