Exxon to BP said to pay more for UAE oil as 75-year pact ends

Adnoc will take full control of the unit operating the Abu Dhabi fields, while completing a bidding process to award new concessions, according to a statement from the producer.Bloomberg/DubaiThe largest US and European oil companies will pay more for Abu Dhabi crude when the end of a 75-year partnership reduces their direct stakes in the emirate’s output, according to two people with knowledge of the matter.Exxon Mobil Corp, BP, Royal Dutch Shell and Total lose their rights as shareholders in the company operating Abu Dhabi’s onshore oil fields after their joint venture expires this week. The international companies will then start paying a premium of 11 cents a barrel over Abu Dhabi’s official selling price for Murban grade crude, the two people said, declining to be identified because the contract terms are private.“As long as their crude price is reasonably competitive and they’re feeding their trading arms, it’s something they can deal with,” Robin Mills, head of consulting at Manaar Energy Consulting and Project Management, said by telephone from Dubai on Thursday. “The companies will be betting that they can trade the crude to add more than 11 cents of value.”The end of an accord accounting for more than half of the output from Opec’s fourth-largest supplier further weakens, at least temporarily, the role of international companies in the group, as member nations seek to retain more oil wealth. Abu Dhabi holds most of the reserves in the UAE, which pumped 2.76mn bpd in December, or 9.2% of all oil supplied by the Organisation of Petroleum Exporting Countries, according to data compiled by Bloomberg.The expiring partnership between the international companies and state-run Abu Dhabi National Oil Co, or Adnoc, accounts for about 1.5mn bpd of Murban crude, the UAE’s main blend. Murban for December costs $113.85 a barrel under Abu Dhabi’s retroactive monthly pricing system.Adnoc will take full control of the unit operating the fields while completing a bidding process to award new concessions, according to a statement from the producer on Wednesday. Until a new concession agreement is reached, Exxon, Shell, BP and Total will buy Murban crude from Adnoc under six-month contracts that will replace some of the oil they would have taken as equity partners, the people said.Abu Dhabi has pumped oil from its onshore fields under concession deals with Exxon, Shell, Total, BP and Portugal’s Partex Oil & Gas, or their predecessors, that have been in effect since January 1939. Adnoc became a partner in the 1970s, forming Abu Dhabi Co for Onshore Oil Operations, or ADCO, in which the five foreign partners held a 40% stake.“BP, Shell, Total and Exxon, each of whom held a 9.5% interest, will see an end to some 150,000 bpd of annual production and the loss of about $50mn of annual fixed income,” Deutsche Bank AG analyst Lucas Herrmann wrote in a note on Thursday. “More surprising is that at this stage there has been no temporary extension and that Adnoc, the state oil company, has taken full control of the fields.”The four companies, which retain some stakes in Abu Dhabi’s offshore production, are among 11 from the US, Europe and Asia that submitted bids in October for new production agreements in the Gulf emirate. Partex, the smallest partner in ADCO with a 2% stake, wasn’t invited to bid. Adnoc may take until January 2015 to choose new partners, Abdulla Nasser al-Suwaidi, the company’s director general, said in November.Adnoc at first considered signing year-long oil supply contracts with BP, Exxon, Shell and Total, the people with knowledge of the matter said. By signing six-month agreements instead, the state producer will have greater flexibility in the event concession agreements are reached earlier than next January, they said.Spokesmen at BP, Exxon and Shell declined to comment. Total media representatives didn’t immediately comment when contacted by phone. An Adnoc spokesman declined to provide additional comment beyond what the company said in the statement on Wednesday.Korea National Oil Corp and Italy’s Eni have said they are bidding for the new concessions. The remaining bidders are Japan Oil Development Co, China National Petroleum Corp, Norway’s Statoil, Occidental Petroleum Corp of the US and Russia’s Rosneft, according to Energy Intelligence Group.