Abu Dhabi onshore contract loss hurts oil majors
The expiry of Abu Dhabi’s historic onshore concession has already eaten into profits at its legacy partners, highlighting the importance for the majors of regaining access to the emirate’s reserves.
Production at BP, Total and Royal Dutch Shell fell by as much as 8.5 per cent this quarter after the January expiry of the Second World War-era contract. ExxonMobil, the fourth major, is due to release results on Thursday.
The four majors have all placed bids to operate slices of the onshore fields, which together account for 1.5 million barrels a day – or half of the Opec producer’s production. Partex, the Portuguese partner with a smaller share, was not invited to the auction. Adnoc is expected to submit its technical evaluation of the legacy candidates and a roster of newcomers, including Asian national oil companies and western independents, within weeks.
Shell, which last year won the rights to Abu Dhabi’s challenging Bab sour gasfield, yesterday reported a 3 per cent drop in earnings last year to US$7.3 billion. The muted figure still beat a Bloomberg survey of analysts that predicted profits of $5bn.
Total, whose assets are not as diversified into gas as Shell’s, suffered a 10 per cent fall in earnings to $3.3bn. Although it is a partner in multiple other energy joint ventures in the emirate, it lost 140,000 bpd of output with the onshore expiry.
BP on Tuesday announced a slump in first-quarter earnings to $3.2bn from $4.2bn a year earlier.
Despite not taking equity oil, the majors remain closely tied to the emirate. All three of the majors that reported earnings earlier this week opted to leave staff at the Abu Dhabi Company for Onshore Oil Operations (Adco), the onshore operator. ExxonMobil was alone in pulling out.
The majors are also helping by marketing Abu Dhabi’s crude through June thanks to a temporary agreement – Adnoc remains dependent on the companies’ crude-buying networks.
The majors have consistently hawked their deep knowledge of Abu Dhabi’s geology and cutting-edge technical skills, but they compete against newcomers who can offer political ties to the world’s centres of economic growth.
On Tuesday China National Petroleum Company, the state entity, sealed a joint-venture agreement with Adnoc to develop assets in the emirate. Since 2012 it has been evaluating the technical merits of five onshore and two offshore blocks that cover much of the emirate west of the Adco fields.
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Updated: April 30, 2014 04:00 AM