The secrecy surrounding Abu Dhabi’s plans for its onshore oil fields has now continued long after the expiry of the 35-year joint-venture concession in January.

Although Abu Dhabi National Oil Company (Adnoc) has not released any official statements on the tendering process, reports suggest bids have been submitted by several international oil companies (IOCs).

The biggest surprise, according to a report by the New York-headquartered Energy Intelligence, was that ExxonMobil declined to bid for the renewal of the concession, removing its staff from the fields and ending the US oil major’s 75-year-long ties with the emirate’s onshore sector.

With Portugal’s Partex also out of the running, only three of the five previous partners that comprised Abu Dhabi Company for Onshore Oil Operations (Adco) are vying for a stake. They are UK-based BP, UK/Dutch Shell Group and France’s Total.

Each of the larger groups held a 9.5 per cent share of Adco, with Partex owning 2 per cent and Adnoc the majority 60 per cent. BP, Shell and Total have kept staff at the onshore operations despite Adnoc taking 100 per cent ownership after the 11 January 2014 expiry date.

Bid decision

Abu Dhabi’s Supreme Petroleum Council (SPC), the emirate’s highest oil body that includes members of the royal family, will assess the bids and is expected to make a final decision in early 2015. However, there is no official date set for forming a new concession.

Other bidding companies are thought to include China National Petroleum Corporation (CNPC) Italy’s Eni, Japan’s Inpex, Korea National Oil Corporation (KNOC), US-based Occidental Petroleum and Norway’s Statoil.

Rosneft was also touted to bid for the concession but it is unclear if the Russian company’s proposal ever materialised.

ExxonMobil still has a presence in Abu Dhabi’s upstream sector, with a 28 per cent stake in offshore operator Zakum Development Company (Zadco), which produces from the giant Upper Zakum field.

Even if the Texas-based firm has not submitted a bid, it does not mean it is necessarily out of the running. In 2012, when Adnoc released a list of companies prequalified to bid, it did not include BP, but later brought the UK major back into the running.

Prized asset

Abu Dhabi, the UAE’s largest emirate and the world’s third-biggest oil exporter, generates more than half its crude output from its 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, with state-owned Adnoc expected to retain a 60 per cent interest.

Speaking at the Abu Dhabi International Petroleum Exhibition & Conference (Adipec) in November 2013, the heads of both BP and Total were vocal on the importance of securing a stake for their respective companies.

During 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 oil prices, despite the stability of the business environment in the UAE relative to the rest of the region.

ExxonMobil and Inpex, Adnoc’s partners in offshore operator Zadco, reportedly negotiated their fee from $1 to $2.85 a barrel; this price could act as a precursor to the Adco deal.

Deal extension

In January, Abu Dhabi extended Inpex’s concession on the offshore Upper Zakum oil field by 15 years, with “fiscal terms and conditions revised from the existing agreement”. The extension brings Inpex’s contract in line with ExxonMobil’s agreement so that both firm’s deals on the Upper Zakum field expire in 2041.

ExxonMobil was seen as one of the most likely partners in the new onshore concession, as it gives the US an economic stake the UAE oil sector, cementing political ties between Washington and its staunch allies in Abu Dhabi.

However, California-based Occidental Petroleum has reportedly bid on the onshore concession instead.

In assessing the bids, decision-makers in Abu Dhabi must find a balance between long-standing Western partners and proposals from Asian companies, such as Inpex, CNPC and KNOC. There are also bids from smaller Western IOCs, such as Eni and Statoil, to consider.

Enhanced oil recovery

Western firms are undoubtedly strong on technology – particularly the crucial enhanced oil recovery (EOR) techniques – but Abu Dhabi will also want to strengthen its relationships with its largest crude oil customers in the East.  

While most of the big spending in Abu Dhabi’s oil sector over recent years has been in the offshore fields of Zadco and Abu Dhabi Marine Operating Company (Adma-Opco), Adco is now expanding capacity at several onshore fields.

As part of the development of the North East Bab fields, Adco will install carbon-dioxide-based (CO2-based) EOR technology in an integrated scheme with Abu Dhabi’s steel operations.

The local Alsa Engineering & Construction has been selected by Adco to build a pilot project for the injection of CO2 at the onshore Rumaitha field.

The CO2 injection plant will free up the natural gas traditionally used to pressurise oil wells and aid recovery to be used for power generation and water desalination.

The project coincides with the phase-three development of the Rumaitha field. Adco this year awarded a consortium of South Korea’s GS Engineering and Dodsal the engineering, procurement and construction (EPC) package to expand the capacity of Rumaitha, along with the nearby Shanayel field.

CO2 will be sourced from the under-construction carbon capture usage and storage (CCUS) project at the Emirates Steel operations in Mussafah and transported to Rumaitha through a 50-kilometre pipeline.

The $122m CCUS project, a joint venture of Adnoc and Abu Dhabi Future Energy Company (Masdar), will capture 800,000 tonnes a year (t/y) of CO2 and is expected to be completed by the end of 2016. The EPC is being carried out by Dodsal, MEED revealed in September 2013.

Director-general of Adnoc, Abdulla Nasser al-Suwaidi, said the project would be expanded to capture gas from other energy-intensive industries and other oil fields would benefit from the programme.

“We are aiming to achieve a 70 per cent recovery factor in the long term. Not only at Rumaitha and Bab. There is potential… at different fields, both onshore and offshore,” Al-Suwaidi said in late 2013. “We will be the first country to inject CO2 offshore.”

Further expansion

Other major projects to be carried out by Adco in the coming year include the expansion of the Al-Dabbiya field – also part of Adco’s North East Bab asset – and increasing capacity on the Sahil, Qusahwira and Mender fields. All are now in the design phase.

The latter – officially called Sahil phase 2 development project, Asab units 6 and 7, Mender FFDP & QW phase 2 development projects – will increase the emirate’s onshore crude capacity by about 8 per cent, from the 1.8 million b/d being commissioned in the current round of developments.

The choice of partners to operate Abu Dhabi’s onshore fields, under what is expected to be a 35-year agreement, is one of the most important decisions facing leaders in the emirate over the coming months.

While experience, technology and price will all be key factors in the assessment, the selection could also have geopolitical implications. A swing in control to Asia’s state energy champions could signify willingness to strengthen ties with its main oil customers and, in the case of China, rising world powers.