OCCIDENTAL Petroleum says its Shah sour gas development in Abu Dhabi is approaching the half-way mark, and further progress should follow soon as the company doubles its spending there this year.

Oxy chief executive Steve Chazen says on the company’s second-quarter earnings call that Shah is 49 per cent complete and “progressing as planned.”

The $10 billion project aims to produce 500 million cubic feet per day of natural gas, 50,000 barrels per day of natural gas liquids (NGLs) and condensate, and 9,200 tonnes per day of sulphur. The sour nature of the gas makes the project challenging, as the partners must contend with a gas stream that contains 23 per cent deadly hydrogen sulphide and 10 per cent carbon dioxide.

Oxy is a 40 per cent partner in the Al Hosen Gas joint venture that is managing the project. Abu Dhabi National Oil Co (Adnoc) holds a 60 per cent stake.

Chazen adds that the initial $10 billion price tag for the project – of which Oxy’s share is $4 billion – has not changed. However, work appears to be proceeding ahead of schedule.

The US independent initially earmarked around $580 million of its $8.3 billion capital spending budget this year to Shah, but Oxy had already spent $564 million by the end of June. And Chazen says that another $600 million in spending is expected this year.

Oxy spent $460 million on the project last year, and also paid Adnoc a one-time $500 million payment to cover its share of development costs incurred before Oxy joined Al Hosn. Oxy replaced former partner ConocoPhillips, which pulled out in early 2010 citing lackluster economics.

The bulk of spending thus far has focused on the project’s gas processing plant and other infrastructure, and Chazen says that spending will wind down at the end of this year and at the start of 2013. However, investment in the project’s upstream component will ramp up at the same time, keeping overall spending levels more or less unchanged.

Phase I of Shah envisions 20 wells, while another 12 will be drilled in Phase II of the project.

Start-up has long been slated for 2014, and Chazen gave no indication of a revised start date despite the accelerated pace of investment.

Regardless of whether Shah comes on line ahead of or on schedule, Oxy’s solid execution to date may bring secondary benefits to the US independent in the interim.

Oxy was one of about 10 firms receiving invitations to prequalify to bid for the emirate’s coveted onshore oil fields, where the current concession will expire in January 2014. Chazen confirmed its participation Wednesday by saying Oxy is “actively involved” in the prequalification process.

Abu Dhabi’s current onshore production capacity is 1.4 million barrels per day, but new projects will expand that to 1.8 mbpd by 2017.

In any case, Oxy’s additional spending at Shah this year comes as part of a broader 11 per cent increase in the company’s capital spending budget for this year.