Abu Dhabi National Oil Company (Adnoc) will combine its two largest offshore oil producers into one entity by early 2018, creating a new company with an estimated capacity of 1.2 million barrels a day (b/d).

State-owned Adnoc said the merger will “enable efficiencies and synergies” across the offshore concessions and fields operated by Abu Dhabi Marine Operating Company (Adma-Opco) and Zakum Development Company (Zadco).

Adnoc holds a 60 per cent stake in both companies, with the remainder held by international oil companies (IOCs), which together operate the various offshore oil fields.

“The existing rights of our partners in the concessions currently operated by Adma-Opco and Zadco will not be affected by the consolidation,” said Adnoc CEO Sultan al-Jaber. “Looking ahead, Adnoc will continue to review and consider all options, and pursue partners for concessions expiring in 2018.” 

Adma-Opco CEO Yaser al-Mazrouei will be appointed as the joint CEO of Adma-Opco and Zadco, and will work with a committee formed by Adnoc and its joint venture partners to oversee the integration.

Planned before

Adnoc has long been considering merging the two companies, MEED reported in July. The two firms operate the respective Lower Zakum and Upper Zakum field – essentially two parts of the same field, which is the largest known offshore oil field in the world in terms of reserves.

Zadco was formed in 1977, when two of Adma-Opco’s international shareholders, the UK’s BP and France’s Total, declined to take a role in developing Upper Zakum. Adnoc formed a new company with US-based ExxonMobil and Adma-Opco’s fourth shareholder, Japan Oil Development Company (Jodco).

Adma-Opco is 14.67 per cent owned by BP and 13.33 per cent owned by Total, with Jodco holding a 12 per cent stake. The company’s concession, which includes the Lower Zakum, Umm Shaif, Nasr and Satah al-Razboot (Sarb) fields, is set to expire in March 2018.

Zadco is 28 per cent owned by ExxonMobil, with Jodco holding a 12 per cent stake. Early in 2014, ExxonMobil and Jodco’s parent group Inpex renegotiated their concession on the Upper Zakum field to expire in 2041, with an improved per-barrel fee.

Zadco, which is carrying out a major capacity expansion at the Upper Zakum field, also operates the Umm al-Dalkh and Satah fields.

Although the existing concession rights and returns of ExxonMobil and Jodco will not be affected by the merger, IOCs are not expected to be offered shared ownership of the combined operating company.

“The consolidation will facilitate enhanced operational performance while providing strategic benefits for future growth and advanced technology integration,” Al-Jaber said. "Importantly, it will unite our offshore experience, streamline governance and decision-making, and give management a better line of sight through the company’s operations.”

“Consolidating the two companies into a single new entity responsible for operating the associated concessions will also help fulfil the Adnoc Group’s strategic imperative of creating a more profitable upstream business, benefiting both Adnoc and its partners.” 

Group changes

Adma-Opco and Zadco are two of Adnoc’s 18 subsidiary companies working across upstream oil production, gas processing, refining and chemicals, and logistics.

Al-Jaber was appointed director-general of the firm in February and has already brought about significant changes. In the following months, Adnoc appointed new heads for its gas and chemicals divisions and replaced the CEOs of six operating companies.

Al-Jaber has introduced a new corporate regime that will require executives to meet specific operational and financial targets. The company heads will be required to deliver regular reports on progress against a set of “key performance indicators” to ensure goals are met on a tight schedule, he said.

MEED also revealed that Adnoc made the decision to cut 5,000 jobs as it restructures in the face of lower oil prices.

Adnoc is still in discussions with potential partners to take the remaining 22 per cent interest in its onshore oil production concession, which accounts for more than half of Abu Dhabi’s crude production.

The state-owned oil producer is looking for international partners to take a total 40 per cent of Abu Dhabi Company for Onshore Petroleum Operations (Adco), and signed contracts with three companies for 18 per cent in the first half of 2015.