Asian companies could be part of oil concessions as ties grow

China National Petroleum Corporation, Japan’s Inpex and South Korea’s Korea National Oil Corporation in the fray

Gulf News

Abu Dhabi: For the first time, Asian oil companies could become part of Abu Dhabi oil concessions to develop land based oilfields, energy experts have said.

Last week, Abu Dhabi awarded 10 per cent stake to the French energy company Total to develop 15 principal onshore oilfields, which represent more than half of the emirate’s production. Other companies are yet to be chosen by the government. Abu Dhabi holds about six per cent of global oil reserves.

In the fray are Royal Dutch Shell, BP, Occidental Petroleum from the US, Statoil from Norway, China National Petroleum Corporation (CNPC), Japan’s Inpex, South Korea’s Korea National Oil Corporation and Italy’s ENI.

Justin Dargin, a global energy expert at the University of Oxford, said Asian companies have a good chance to be successful. “While Western firms have long held a presence in the UAE and wider Gulf, Asia now is the new market and Abu Dhabi is keen to expand its collaboration outside of its traditional Western partners,” said Dargin.

“East Asia is the primary export growth zone for oil and petrochemicals for Abu Dhabi and a collaborative arrangement with some Asian firms will assist the UAE in acquiring market share in Asian countries.”

Dargin said Abu Dhabi will chose a mix of Western international oil companies and Asian national oil companies to balance the participation between Abu Dhabi’s long term relationships with Western companies and forging new relationships with Asian oil companies.

“While Western oil companies will also have some role in the UAE, Asian companies are increasingly making a strong presence. This is likely to continue on for the long term. China is the second largest trading partner of the UAE.”

Dr Mamdouh G Salameh, an international oil economist, said Abu Dhabi National Oil Company (Adnoc) would prefer to retain the cooperation of the previous equity stake holders and also grant equity stake to some Asian companies.

“Adnoc’s objectives would be to secure better terms from the participating companies, enhance UAE’s oil production in coming years by using the latest oil technology provided by the Western oil giants and also strengthen its market share in the Asia-Pacific region by inviting Asian oil companies to participate”, he said.

Abu Dhabi might be inclined to grant a 5 per cent equity stake to each of the Asian oil companies, Korea National oil Corporation, China’s CNPC and Japan’s Inpex as the Asia-Pacific market imports a large share of UAE’s oil exports, he added.

Nine Asian and western oil companies are bidding for stakes in the concession after a deal with western oil majors dating back to the 1970s expired in January last year.

ExxonMobil, Royal Dutch Shell, Total and BP had each held 9.5 per cent equity stakes in the Adco (Abu Dhabi Company for Onshore Oil Operations Limited) concession since the 1970s.

Dargin said companies will be under a significant amount of pressure to accept terms similar to Total.

“In the current low price environment, many of the bidders will be hard-pressed to absorb terms similar to Total, but they will be obligated to do so if they wish to remain active in the UAE for the long-term and not be marginalised.”

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