Chinese companies are big winners in the competition among foreign bidders for stakes in Abu Dhabi’s largest oil concession, snatching a combined 12% of the venture as the Middle Eastern emirate looks increasingly to Asia, its biggest market, for investment.
Abu Dhabi National Oil Co awarded a 4% stake in the onshore venture – the last share of the project that was still up for grabs – to Shanghai-based CEFC China Energy Co, Adnoc said on Monday in an e-mailed statement. CEFC is paying an $888mn signing bonus, Adnoc said. The announcement came one day after China National Petroleum Corp agreed to buy 8% of the same concession for $1.8bn.
The dual awards mark China’s debut as a major shareholder in the biggest oilfield operator in the UAE, Opec’s fourth-largest member. Together, the stakes held by state-run CNPC and energy investor CEFC exceed the 10% shares that both BP and Total own. BP signed on to the project in December, and Total in January 2015.
Asia will show the fastest growth in energy demand over the next two decades, according to the International Energy Agency. Abu Dhabi is among Gulf oil producers including Saudi Arabia and Iraq that are tapping Asia for energy investments. While European and US companies have pumped oil in the Middle East for more than a century, their Asian counterparts are relative newcomers.
Japanese and Korean companies are also investors with Adnoc in the deposits.
“If you’re Abu Dhabi and looking for demand growth, China is the future and its demand is going to continue to grow,” Chris Gunson, a Dubai-based lawyer at Amereller Legal Consultants, said on Sunday. “For the big buyers in Asia, the logical source of that future supply is the Gulf.”
CNPC and CEFC are joining the Abu Dhabi Company for Onshore Petroleum Operations, or ADCO. Japan’s Inpex Corp owns 5% of the venture, while GS Energy Corp of South Korea holds 3%. No companies from Asia were involved in the previous concession for the onshore fields. Abu Dhabi plans to retain a 60% stake in ADCO.
Japanese companies are partners in at least four other oil-production ventures in Abu Dhabi, the largest in the UAE. Korean and Chinese companies are exploring at smaller concessions in the emirate. CNPC’s engineering arm also helped build an export pipeline in Abu Dhabi.
Elsewhere in the region, CNPC is developing Iraq’s biggest oil field, together with BP. China Petroleum and Chemical Corp is a partner in a refinery in Saudi Arabia, and Chinese firms are developing crude deposits in Iran.
With the two deals announced this week, Chinese buyers secure more supplies of Abu Dhabi’s main Murban crude grade. CNPC agreed in 2011 to increase purchases of crude from the emirate under long-term contracts. ADCO’s international partners are responsible for funding their shares of investment in the deposits as well as paying signing bonuses.
Abu Dhabi, with 6% of global crude reserves, is seeking to boost production capacity to 3.5mn bpd by 2018. ADCO pumps about half of Abu Dhabi’s roughly 3mn barrels of daily crude output.
The emirate is expanding capacity amid a global oil glut that cut prices to an average of about $50 a barrel over the last two years. The Organization of Petroleum Exporting Countries agreed in November to cut production to trim crude stockpiles and boost prices. Benchmark Brent crude has gained about 11% since the day Opec announced that agreement.
The 40-year ADCO concession replaces an earlier agreement under which Western oil majors pumped the emirate’s crude. Exxon Mobil Corp and Royal Dutch Shell took part in the previous venture, also called ADCO, along with BP, Total and Portugal’s Partex Oil & Gas Group. That deal expired in January 2014.
Abu Dhabi is among Gulf oil producers including Saudi Arabia and Iraq that are tapping Asia for energy investments
