Abu Dhabi strengthens ties with Asian oil customers

28 April 2015

Onshore stake for Japan’s Inpex a sign of growing Asian influence in emirate’s upstream sector

  • Inpex now part of all three major Abu Dhabi producers
  • Leadership also assessing South Korean and Chinese bids
  • 25 per cent of interest in Adco joint venture still available

Abu Dhabi has further strengthened ties with one of its key oil customers in Asia by awarding Japan’s Inpex a 5 per cent stake in its largest-producing oil asset.

Inpex has become the second international oil company (IOC) to enter Abu Dhabi Company for Onshore Petroleum Operations (Adco) after France’s Total entered the 40-year joint venture with a 10 per cent stake earlier in the year.

Inpex, through its Japan Oil Development Company (Jodco) subsidiaries, now has a stake in all three of Abu Dhabi’s major oil producing companies.

The firm already holds 12 per cent stakes in Abu Dhabi Marine Operating Company (Adma-Opco) and Zakum Development Company (Zadco), which between them operate all of the emirate’s major offshore oil assets.

The majority of Abu Dhabi’s crude exports head east – to Japan, South Korea, China and India – and the emirate’s leadership has gradually given its customer countries larger roles in its upstream oil sector.

South Korea entered Abu Dhabi’s upstream sector for the first time in 2012, when Korea National Oil Corporation (Knoc) was awarded three exploration blocks.

In 2014, Abu Dhabi awarded China National Petroleum Corporation (CNPC) a 40 per cent stake in the joint venture Al-Yasat Company for Petroleum Operations without giving details on the fields covered by the new concession.

Inpex and Total now make up 15 per cent of the new Adoc concession, with IOCs expected to account for a total of 40 per cent once the joint venture has been completed.

It remains unclear when majority stakeholder, the state-owned Abu Dhabi National Oil Company (Adnoc), plans to award the remainder of the shares or who the winners are likely to be.

Other companies bidding for a stake include UK-based BP, China National Petroleum Corporation (CNPC), Italy’s Eni, Korea National Oil Corporation (KNOC), US-based Occidental Petroleum, the UK/Dutch Shell Group and Norway’s Statoil.

Although BP and Shell have a long history in operating Abu Dhabi’s onshore fields, Abu Dhabi’s leadership will also be considering awarding stakes to the Korean and Chinese companies to forge stronger ties with the major economic powers in that region.

Inpex was reported by the Japanese media to have paid $1.1bn to enter Adco with a 5 per cent stake. This fee is thought to be a significant sticking point for the IOCs already established in Abu Dhabi considering entry to the 40-year joint venture.

Adoc is aiming to increase its production capacity to 1.8 million barrels a day (b/d) from a current level of about 1.6 million b/d. This represents more than half the crude output capacity of the UAE.

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