Oil concession expiry to test Abu Dhabi

05 July 2012

The emirate’s biggest oil concession expires in 2014 as it looks to expand production over next five years

As the UAE carries out its ambitious plans to expand oil production over the next five years, questions remain over who will share the profit with state-owned Abu Dhabi National Oil Company (Adnoc). The country aims to increase its crude output capacity to 3.5 million barrels a day (b/d) from the current 2.7 million b/d through a combination of offshore and onshore field developments.

Adnoc’s biggest oil concession, Abu Dhabi Company for Onshore Operations (Adco), expires in 2014 and Abu Dhabi has given little away about how it will select new partners for its onshore fields.

Adco, which produces almost 60 per cent of the UAE’s crude output, is 60 per cent owned by Adnoc, with the UK’s BP, the US’ ExxonMobil, UK/Dutch Shell, France’s Total and Portugal’s Partex holding the remaining shares.

It is unclear how the ownership of Adco’s oil fields will be split after 2014. Adnoc could keep the same partnership together as it did with Abu Dhabi Gas Industries (Gasco) in 2009. It could also form a partnership with different companies, or even split the Adco fields into separate partnerships.

The UAE exports the majority of its crude to Asian countries and has signed exploration agreements with Chinese and South Korean oil firms over the past year. In renewing the Adco concession, Adnoc faces tough choices. By introducing Asian partners, it could secure potentially greater access to its customers. But sticking with a mix of international oil companies would provide it with better technology, experience and a shared history of co-operation.

With the UAE’s major offshore concession Abu Dhabi Marine Operating Company (Adma-Opco) also up for renewal in 2018, the country’s oil market could look very different after the next round of expansions.

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