UAE Looks East For Oil Partners

The United Arab Emirates is likely to allow more foreign partners, especially from Asia, to take stakes in its oil and gas concessions, the chief executive of Abu Dhabi Marine Operating Company (ADMA-OPCO) said on Tuesday.

Abu Dhabi, which has the largest share of the UAE’s oil, plans to invest $60 billion over the next five years to boost its oil production capacity from 2.7 million to 3.5 million barrels per day (bpd) – and oil concessions lie at the heart of its ambitions.

The concessions system allows oil and gas producers to acquire equity hydrocarbons from the OPEC member in return for investing in projects.

Western oil majors like ExxonMobil, Shell and Total have been partners with Abu Dhabi for decades, but concession renewals starting from 2014 could allow Asian companies to boost their presence in a country which now exports nearly all its oil to Asia.

“The principal of the tender is to be more open for partners… In the last three years there has been a change towards more openness, some additional partners,” ADMA-OPCO CEO Ali Al Jarwan told reporters.

“There’s consideration to have newcomers in these marginal fields,” Jarwan said when asked if Korean and Chinese companies could be awarded some field rights.

Japanese refiner Cosmo Oil has already secured a new concession area, while a consortium led by Korea National Oil Corporation (KNOC) finalised a deal in March to take a 40 per cent stake in two onshore and one offshore oil drilling areas.

Also earlier this year, ADNOC and China National Petroleum Corporation (CNPC) signed an agreement to cooperate in upstream projects, through which the Chinese company has been studying some exploration opportunities in some onshore and offshore blocks. A final agreement for production is yet to be signed.

But officials say Western international oil companies (IOCs) will remain major players in the UAE oil and gas industry.

“The most probable scenario is continuation of IOCs’ partnership with ADNOC, with a minimum 60 per cent ADNOC holding and either one or more partner being from the West,” Mohammed Sahoo Al Suwaidi, chief executive of Abu Dhabi Gas Industries Ltd. (GASCO) said, adding that Korean and Chinese companies may get stakes.

Some big oil companies, particularly ExxonMobil, have expressed their discomfort about the concession structure. They are concerned about operating side by side with rivals in an ADNOC-controlled concession, with all partners expected to share their own technology.

But both Suwaidi and Jarwan said the existing structure was likely to be kept, even though there was no final decision yet.

“We enjoy the partnership,” Jarwan said. “It’s been working very well.”

The ADMA-OPCO concession, which has a capacity of around 550,000 bpd, expires in 2018. The next concession renewal is due in 2014 and it belongs to Abu Dhabi Company for Onshore Operations (ADCO).

In January, ADNOC’s Directly General said ADCO concessions were going to be put to bidding this year and companies would be screened. He did not say when the process would be finalized.

“The decision makers will look at it case by case. There’s no one solution for each joint venture,” Suwaidi said.