DUBAI: The long-term future of fields that produce about half Abu Dhabi’s oil remains unclear with only one day of a 75-year partnership with western oil companies left to run.
Some of the world’s largest energy companies — ExxonMobil, Royal Dutch Shell, Total and BP — have been pumping crude from the Abu Dhabi desert for decades, taking payment in oil.
From midnight today, the 9.5 percent equity stakes that each held in the venture operating the fields will expire. Abu Dhabi National Oil Company (ADNOC), which until now has held 60 percent in the venture, will assume sole responsibility for these fields, which produce around 1.6 million barrels per day (b/d), compared with total UAE production of around 2.75m b/d.
Many of the western company staff are expected to remain on site to help keep them running smoothly while Abu Dhabi debates what do over the long term.
What the political elite will do with the fields that have turned Abu Dhabi from a struggling fishing and pearl farming economy into one of the world’s richest oil exporting countries is far from clear.
Few outside the inner circles of the government of Abu Dhabi seem to know what is happening, but many industry observers believe the leadership is torn between sticking with the western companies, making room for some Asian newcomers, or pressuring ADNOC to go it alone without help from either group.
ADNOC’s director-general, Abdulla Nasser Al Suwaidi, said back in November 2012 that ADNOC would recommend that the Supreme Petroleum Council of Abu Dhabi maintain the current partners, because they logically have the most knowledge and experience to manage them effectively.
The oil industry source said the oilfields would continue to run normally under ADNOC, while most of the foreign staff stay on site. But the western oil rivals who have been working together and with ADNOC since the 1970s would no longer offer any technical or commercial advice on getting the most out of the fields in the long term.
None of the companies vying to be part of the next phase of development would comment on the situation. Companies hoping to operate in Abu Dhabi’s oil industry have to sign confidentiality agreements forbidding them from even acknowledging the existence of the agreements, one legal expert said.
Analysts at Deutsche Bank said that the financial impact on the big four oil companies of losing an average of around 150,000 barrels per day of production at a fixed margin of $1 per barrel would reduce their earnings by around $50m per year each.
The loss of their equity stakes under the Abu Dhabi Company for Onshore Oil Operations concession could also shave around 3 percent off the European oil industry’s aggregate production in 2014, Deutsche Bank estimated.
While the oil majors are no longer guaranteed this oil, ADNOC will now have to find buyers for output that previously had guaranteed takers.
Abu Dhabi signed 75-year agreements with western oil companies in January 1939. The government acquired a 60 percent share in the early 1970s and ADCO was formed in 1978. The concession system allows oil and gas producers to acquire equity in hydrocarbon resources. The ADCO concession is the largest, with most of the output coming from five fields: Asab, Bab, Bu Hasa, Sahil and Shah.
Reuters
