Abu Dhabi: Mubadala will hold 2 per cent shares in BP on behalf of Abu Dhabi government as part of the Adco concession deal that was reached between the British oil giant and Abu Dhabi National Oil Company on Saturday.
BP has said that is agreed to issue new ordinary shares representing approximately 2 per cent BP’s issued share capital to be held on behalf of Abu Dhabi government for a 10 per cent stake in onshore oil concession operated by Adco. The total value of the shares is about $2.2 billion (Dh8.08 billion).
“We can confirm that Mubadala will hold the shares in BP on behalf of the Abu Dhabi Government,” a spokesperson told Gulf News.
The deal will give BP access to one of the largest onshore oilfields in the Middle East that are expected to produce the equivalent of 20 to 30 billion barrels of oil in the 40 year period the deal is valid for.
BP’s net share of oil and gas production from Abu Dhabi is currently around 95,000 barrels of oil a day and is expected to grow to around 260,000 barrels of oil a day with the new agreement.
“The lower cost characteristics of this already-producing conventional onshore oil development will be accretive to earnings and cash flow, while providing BP with another building block of long-term growth,” said Brian Gilvary, BP’s chief financial officer in a statement.
The new concession agreement was necessitated following the expiry of old deal with oil majors dating back to the 1970s in January 2014.
Apart from BP, other companies holding a stake in the lucrative oilfields include Total of France, Inpex Corporation of Japan and GS Energy of South Korea who each own a 10 per cent, 5 per cent and 3 per cent interest respectively.
Analysts said the agreement is positive for both BP and Adnoc with the British oil giant gaining access to Abu Dhabi’s prestigious onshore oilfields and Adnoc getting a percentage of BP’s shares.
“BP is securing access to world class reserves and Adnoc is maintaining a long-term relationship with a trusted partner that has specific knowledge of the assets and has the technical and execution skill sets to help optimise development and production. Adnoc may also see some upside on BP’s share price,” Richard Devine, an oil and gas partner in the law firm Clyde & Co told Gulf News over phone.
“It will be interesting to see if a similar deal can be struck with other interested parties. If other listed producers know this kind of a deal is available, it might make them more willing to engage with Adnoc.”
Oil companies are believed to have paid a large sum of money to Adnoc to obtain a stake in Abu Dhabi’s onshore oil concessions. News reports said French oil company Total paid $2.2 billion, Inpex $1.1 billion and GS Energy $675 million as signature bonuses.
The deal is also expected to boost diversification efforts of Abu Dhabi government as it will have 2 per cent share in BP which would enable the emirate to generate extra cash, according to Dr Mamdouh G Salameh, an oil economist based in London.
“The agreement between Adnoc and BP marks a milestone in Adnoc’s efforts to forge a new partnership model that brings technology, expertise and financing aimed at maximising its resources,” he said adding that the deal could enable Abu Dhabi to raise the recovery factor from its oil wells.
