Abu Dhabi finalizes once in a generation deal: Fuel for Thought

At the start of last week, Abu Dhabi finalized a 40-year deal that formally cemented the UAE's shift to Asia and struck a delicate balance in tailoring the deal to fit the needs of most stakeholders already in the concession.

The Asia pivot has been ongoing for some time in terms of oil flows, but the previous Adco concessions had no Asian companies or states involved, and now the ownership structure reflects those flows.

Adco had earlier signed up Japan's Inpex with 5% and South Korea's GS Energy with 3%, and now has two Chinese companies taking the last 12% of the concession. Total and BP each have 10%, and Adco retained its 60% share.

There was never much of a doubt that Abu Dhabi's Supreme Petroleum Council would bring in at least one Chinese partner to be a new shareholder in Adco, the grandfathered name for the concession covering Abu Dhabi's biggest onshore oilfields.

Not only did the SPC bring in a Chinese company, they got China's pre-eminent state oil company, China's National Petroleum Corp to join the partnership.

But there had been questions about how much of a stake, which partner and at what price deals with Chinese partners would be struck.

In view of the expected technical contribution of the western majors, balanced against the economic importance to Abu Dhabi of strengthening political and commercial ties with Beijing, the SPC pulled off a diplomatic coup by avoiding the pitfall of awarding to CNPC the full 12% of Adco that remained up for grabs at the beginning of this year.

That could have been disastrous as Total and BP, had they been left with smaller stakes in Adco than the Chinese state-owned company, might well have felt undervalued in the partnership, eroding their potential effectiveness as technical leads Abu Dhabi wanted to avoid a repeat of what happened with the last group of shareholders where wariness over sharing technology contributed to multiple delays to expanding onshore production to a targeted 3.5 million b/d, a goal likely to be met next year.

In the previous team of major shareholders, which included ExxonMobil, BP, Total and Shell, the companies did not want to continue to share their proprietary technologies with state oil companies in the Persian Gulf for what they considered too a low price or, for that matter, with each other. The exact remuneration terms of Abu Dhabi's concessions were never disclosed, but most analysts estimated that international partners were receiving about $1/b.

The result with the current concessions was CNPC getting 8% and China's privately run CEFC getting the last 4%.

Ensuring technology transfer to the next generation

CNPC was disclosed as paying $1.8 billion for 8% of Adco, or $225 million for each 1% share. The Chinese state-owned company has also agreed to establish a center for enhanced oil recovery technology in Abu Dhabi, which is likely to entail a further significant investment BP and Total not only paid a lower price, they were also awarded the technological and operational leads in different fields. This will hopefully encourage unencumbered field development by limiting the potential for unintentional sharing of proprietary technologies.

As for China, it not only secured feedstock for its growing refinery sector, it took another step onto the world economic and political stage as being the main shareholder at 12% in one of the prized hydrocarbon spots in the world.

For Abu Dhabi, the emirate retains experienced technological know-how, along with preexisting familiarity with the particulars of Abu Dhabi oil reserves, in their deals with Total and BP. That's necessary to keep production on track. Moreover, Abu Dhabi scored economic and political points by making sure their largest buyers in Asia are invested in the production process.

Abu Dhabi also got CNPC to agree to set up an EOR technology and research center to help ensure technology transfer to the next generation Emirati oil professionals. This initiative would presumably complement Abu Dhabi's existing degree-granting Petroleum Institute, of which ADNOC, Total, BP, Shell and ExxonMobil are the major sponsors.

The generational aspect to the deal cannot be overlooked. These are 40 year contracts and explain why it took Abu Dhabi more than three years to orchestrate partnerships that align it's political, economic and technological needs for years to come.

Tamsin Carlisle, Senior Editor

Tamsin Carlisle is a senior writer and editor with the Oil News and analysis Group of S&P Global Platts. Based in Dubai, United Arab Emirates, she monitors the petroleum sector across the Middle East, especially in key producing states around the Persian Gulf, as well as the regional economic, trade and political currents influencing oil supply.

New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site


PlattsAbu Dhabi

More items from oilvoice

Cyber Security Experts Unite to Protect Europe’s Critical Industries

CS4CA Summit Returns to London this October Staying abreast of fast-paced industry developments is crucial for cyber security professionals. And while one can learn a lot from publications and social media, it's hard to beat the value of insights gained first-hand from peers. This is why 150+ IT ...

OilVoice Press - OilVoice

Posted 6 months agoPress > cybereurope

Africa E&P Summit

The organisers of the Africa E&P Summit are bringing together Africa's leading exploration companies and governments, just one of the many reasons why you should be attending frontier's event that they are organising and hosting in London at the IET: Savoy Place, 22-23 May. Over 200 key senior exec ...

OilVoice Press - OilVoice

Posted 11 months agoPress > Africasummitoil summit +2

Equinor Deepens in Offshore Wind in Poland

Equinor has exercised an option to acquire a 50 % interest in the offshore wind development project Bałtyk I in Poland from Polenergia. This transaction is a follow-up of the agreement between the two companies which came into force in May 2018 , by which Equinor acquired a 50 % inter ...

OilVoice Press - OilVoice

Posted 1 year agoPress > EquinorEquinor EnergyPoland +2

Nigeria has highest capex on crude and natural gas projects in sub-Saharan Africa Over Next Seven Years, says GlobalData

Nigeria accounts for more than 34% of the proposed capital expenditure (capex) on planned and announced crude and natural gas projects in the sub-Saharan Africa over the period 2018–2025, according to GlobalData , a leading data and analytics company. The company's report: ‘H2 2018 Production ...

OilVoice Press - OilVoice

Posted 1 year agoOpinion > GlobalDataNigeriaCrude +5

CNOOC Signs Strategic Cooperation Agreements with 9 International Oil Companies

HONG KONG, Dec. 18, 2018 /PRNewswire/ -- CNOOC Limited (the "Company", SEHK: 00883, NYSE: CEO, TSX: CNU) announced today that its parent company, China National Offshore Oil Corporation (CNOOC), has signed Strategic Cooperation Agreements with 9 international oil companies including: Chevron, Conoco ...

OilVoice Press - OilVoice

Posted 1 year agoPress > CNOOCChina National Offshore Oil CorporationChevron +11
All posts from oilvoice