Adnoc oil concession may expire before new partnership announced

06 February 2018
Output from five offshore fields is unlikely to be impacted

Adnoc Offshore may allow its existing concession agreement with BP and Total to expire before announcing any new partnership deals, according to Energy Aspects analyst Richard Mallinson.

The concession agreement dates back to 1953 and covers five major fields:

  • Lower Zakum
  • Umm Shaif
  • Nasr
  • Umm Lulu
  • Satah Al Razboot

The current agreement is due to expire in March, but it is possible that the new concession deal may not be announced until much later.

A precedent for partnership deals being announced after the old deal has expired has been set by the Adco concession, which is now known as Adnoc Onshore.

Adnoc allowed its existing concession to expire in 2014, before it had started to award stakes in the new concession.

It ended up taking three years for Adnoc to complete its hunt for partners to take on the 40 per cent stake that it had designated for private ownership.

Mallinson believes that Adnoc may want to complete the ongoing merger of Adma-Opco and Zadco before finalising stakes in a new concession.

Even if the existing deal expires it is unlikely that there will be any operational problems concerning the fields covered by the concession.

"The Adco experience doesn’t suggest there would be any supply disruptions even if the negotiations aren’t concluded before the old concession expires," said Mallinson.

Current shareholders in the fields are UK-based BP with 14.67 per cent, France's Total with 13.33 per cent and Japan’s Jodco with 12 per cent.

The Abu Dhabi Government, through Adnoc, has a 60 per cent holding.

Adnoc has signalled that it wants to spit the existing concession into three smaller concessions.

One area will contain the Lower Zakum field, a second will include the Umm Shaif and Nasr deposits and the third will comprise the Satah Al Razboot (Sarb) and Umm Lulu fields, according to reports.

Under current plans Adnoc will retain a 60 per cent shareholding in each concession.

In August 2017 Adnoc’s CEO Sultan al-Jaber, said that his company was in advanced discussions with more than a dozen energy companies over the new concessions.

He said the concessions would have a new structure and terms that would accommodate a greater number of strategic partners, which would bring technology, expertise and value.

One industry source said in mid-2017 there were expectations that there would be partnership deals announced before the deal expired.

“Most people were expecting that the new partners would be announced and all this would all be sorted before the end of the year,” said one source.

“Now it’s February and we still don’t have any clarity.”

The new Adnoc Offshore contracts will govern operations at the deposits for several decades. The fields currently produce about 700,000 b/d, with a target to pump 1 million b/d by 2021.

Under the contract for the new venture, international companies will no longer receive a fixed fee for each barrel of oil they produce, according to Bloomberg. Instead, the partners will receive shares of the oil produced at the fields and any profit from sales of the crude minus costs, taxes and royalties paid to the government.

There has been speculation that China National Petroleum Corporation (CNPC) could be formally announced as one of the partners.

Adnoc and CNPC signed a framework agreement in November agreeing to look at collaboration opportunities including in Abu Dhabi’s Lower Zakum, Umm Shaif and Nasr offshore concessions.

Other projects mentioned in the cooperation framework agreement were the Bab Bu Hasa, Ghasha and Hail sour gas development projects.

Other companies that have been connected to the new concession deals are: Japan's Inpex, BP, Total and Norway's Statoil.

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