Abu Dhabi oil sector in dark over concession

02 February 2015

Total takes 10 per cent joint venture to operate onshore fields but no other partners announced

The Abu Dhabi oil and gas industry remains in the dark about which companies will operate over half the emirate’s upstream oil capacity for the next four decades following the announcement of a deal by Total on 29 January.

The French energy major revealed that it had been awarded a 10 per cent stake in a new 40-year joint venture named Abu Dhabi Company for Onshore Petroleum Operations Limited (Adco) to operate all of Abu Dhabi’s onshore oil production assets.

Total said that the deal had been effective since 1 January 2015 and also included its appointment as asset leader for the Bu Hasa and Southeast asset – the Sahil, Asab, Shah, Qusahwira and Mender fields – accounting for about two thirds of Adco’s production.

Total was one of nine companies involved in the opaque bidding process to form a new concession. Since the announcement, there has been no word from any of the other bidders or the majority stakeholder, the state-owned Abu Dhabi National Oil Company (ADNOC).

“We were the first international oil company (IOC) to be selected for the joint venture. So far, we are the only one and we are very happy with it,” a Total spokesperson told MEED shortly after the announcement. “I think the other companies will follow.”

The rival bidders are thought to be UK-based BP, China National Petroleum Corporation (CNPC), Italy’s Eni, Japan-based Inpex, Korea National Oil Corporation (KNOC), US-based Occidental Petroleum, the UK/Dutch Shell group and Norway’s Statoil.

Market sources told MEED in late 2014 that the favourites to join Adnoc in the joint venture were Total, along with BP, Shell and Statoil.

Although Statoil is the smallest bidder and has no history in Abu Dhabi’s upstream sector, it is being considered due to its strength in enhanced oil recovery technology (EOR), which will form a key part of Adco’s expansion plans over the coming decades.

The new joint venture will replace the previous version of Adco – Abu Dhabi Company for Onshore Oil Operations – that expired on 11 January 2014 when Adnoc took 100 per cent ownership of the assets.

The original 35-year Adco joint venture was 60 per cent owned by Adnoc with BP, US-based ExxonMobil, Shell and Total each taking a 9.5 per cent stake and Portugal’s Partex holding a 2 per cent share.

The biggest surprise of the bidding process was ExxonMobil’s decision not to bid for the new concession, ending the US oil major’s 75-year ties with the emirate’s onshore sector. Partex is also out of the race.

Adco is expected to produce 1.6 million barrels a day (b/d) in 2015, with an objective to increase output to 1.8 million b/d in the coming years.

The final decision on which companies enter the Adco joint venture will be made by the highest governing body in the Abu Dhabi’s oil industry, the Supreme Petroleum Council (SPC), chaired by the emirate’s ruler and UAE President Sheikh Khalifa bin Zayed al-Nahyan.

It is unclear whether the SPC has made a final decision on the remaining companies set to join the joint venture or if it will award the remaining stakes in piecemeal process.

Abu Dhabi, the UAE’s largest emirate and the world’s third-biggest oil exporter, generates more than half its crude output from the onshore fields. This makes the concession a highly prized asset for IOCs looking for a long-term presence in the Middle East.

Bids were initially reported to be submitted in October 2013 with firms asked to hand in proposals for 5 or 10 per cent stakes in the fields.

During the previous Adco’s 35 year partnership, Adnoc paid a flat $1 a barrel fee to each of its international operators. This amount is seen as unfavourable at today’s market, despite the collapse in global crude prices over the second half of 2014, and IOCs will likely receive revised terms.

Total has a strong relationship with the Abu Dhabi leadership, holding stakes in offshore producer Abu Dhabi Marine Operating Company (ADMA-OPCO), gas processor Abu Dhabi Gas Industries (Gasco), liquefied natural gas exporter Abu Dhabi Gas Liquefaction Company (Adgas) and other joint ventures in the emirate.

Follow Mark Watts on Twitter: @MEEDMark 

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