The UAE took a major step toward expanding its oil production capacity, awarding Italy's Snamprogetti, the engineering arm of Italian energy group Eni, a $316m engineering, procurement and construction (EPC) contract to upgrade the Bu Hasa onshore oilfield.

The field is operated by the Abu Dhabi Co for Onshore Operations (Adco), a subsidiary of the Abu Dhabi National Oil Co (Adnoc).

'The contract is for the Bu Hasa Facilities Development Project at the Bu Hasa field located 200km (124 miles) southwest of Abu Dhabi,' an Adco statement said after the Sep 14 signing ceremony between Adco and Snamprogetti.

Due for completion by end-2006, the project involves construction of a plant with total capacity of 730,000 bpd of crude.

'The project consists of new centralised oil production facilities and gas and water injection facilities applying the latest technology,' the statement added.

The goal of the much delayed project is to increase production capacity at Bu Hasa to 480,000 bpd from 100,000 bpd currently.

The project is part of the UAE's plans to raise production capacity from 2.m bpd now to 3.6m bpd by 2005 and 4m bpd in 2010.

The UAE, with proven recoverable oil reserves of 98bn barrels, is one of the few OPEC producers with any significant spare capacity, the other being Saudi Arabia.

Another project awaiting approval that would significantly boost the UAE's production capacity is the Upper Zakum development plan. Adnoc is still studying bids submitted by six foreign oil companies for a stake in the Zakum Development Co, operator of the 500,000 bpd Upper Zakum oilfield, one of the world's biggest offshore fields.