Abu Dhabi: The awarding of the 3 per cent stake to GS Energy in Abu Dhabi concession did not come as a surprise to analysts who said that the new deal would help South Korea in securing energy supplies.
Abu Dhabi National Oil Company (Adnoc) on Wednesday awarded the contract to GS Energy to develop onshore oilfields, which produce 1.6 million barrels of oil per day and have a target of 1.7 million from 2017.
The South Korean firm is the third company to be awarded the stake after Japanese Inpex Corp bagged a 5 per cent stake in April and French oil major Total 10 per cent in January.
According to reports, GS Energy paid $676 million (Dh2.48 billion) to win the deal.
“It is not surprising that a Korean company won the deal. There has been some expectation that major Asian firms will be awarded the contract,” Edward Bell, a commodity analyst at Emirates NBD, told Gulf News.
“GS Energy winning the concession is a reflection of the long-standing trade relations between the UAE and South Korea. It reinforces strong economic ties between the two countries,” he added. “The new concession helps South Korea in guaranteeing energy supplies to meet its requirements. Korea, like Japan, doesn’t have domestic production and depends on foreign countries for its energy supplies.”
A Chinese oil and gas company may win a further stake in the Abu Dhabi concession but the industry there may be focused on domestic consolidation before moving into new ventures in the Middle East, Bell said.
Abu Dhabi is awarding new contracts after a deal with major western oil companies dating back to the 1970s expired in January last year.
The companies bidding to win the stakes in Abu Dhabi Company for Onshore Oil Operations (Adco) concession include Royal Dutch Shell, BP, Occidental Petroleum from the US, Statoil from Norway, China National Petroleum Corporation (CNPC), South Korea’s Korea National Oil Corporation and Italy’s ENI.
Exxon Mobil, which was part of the old agreement, opted out of the bidding process.
Richard Mallinson, an analyst at London-based Energy Aspects, said the new deal secures South Korean refiners around 50,000 barrels of oil per day over the next 40 years from the UAE.
“UAE is already a reliable supplier to South Korea and the new concessions gives them further security as well as a share in the upstream. It’s a very long standing and well established concession,” he said, adding that there’s a clear reason for both sides to sign the deal. “For Abu Dhabi, the attractiveness is that Asia is the key market, so we saw them awarding a contract to Japanese firm Inpex and now the South Korean company. For South Koreans and Japanese, it’s about securing the share of the upstream for long term supply.”
He predicted a combination of the Western oil majors and Asian firms to win the stakes in the development of the oilfields.
In 2014, South Korea imported about 2.54 million barrels of oil per day. From the UAE it received about 300,000 barrels of oil constituting over 10 per cent of the total imports with the Saudi Arabia being the single biggest supplier.