x Abu Dhabi, UAEFriday 19 January 2018

Analysts say shorter deals possible on Adco oil concession

Five international oil companies have stakes, with Adnoc having a 60 per cent share, in the onshore operation.

The UAE’s biggest onshore oil concession, which is up for renewal next year, could include more generous terms in shorter-tenure contracts for the international oil partners working with Abu Dhabi National Oil Company (Adnoc) in the 75-year concession, analysts at the consultancy Wood Mackenzie said yesterday.

Abu Dhabi Company for Onshore Oil Operations (Adco), in which Adnoc has a 60 per cent stake with the rest held by five international oil companies, is still attractive to international oil companies, but should offer better terms because some of its fields are maturing, according to Richard Quin, the head of upstream research for the Middle East and North Africa at Wood Mackenzie.

“It is the last big opportunity [in the Middle East], 20 billion barrels plus of remaining reserves in a very safe part of the Middle East,” said Mr Quin.

“I think there needs to be a greater appreciation that the fields are increasingly mature, so I expect them to be more generous. I don’t believe 75 years will be offered again. I think it will be something much shorter than that, 20, 30 or 40 years.”

Currently Adco’s partners receive about US$1 per barrel of oil produced. BP, ExxonMobil, Royal Dutch Shell and Total have a 9.5 per cent stake in Adco, while Partex has a 2 per cent stake in the concession.

Adco contributes about 43 per cent of the UAE’s current oil production and is likely to continue to account for at least 40 per cent by the end of the decade, estimates Mr Quin.

In the future Adnoc will increasingly rely on enhanced oil recovery (EOR) techniques for its maturing fields and is considering the use of carbon dioxide instead of natural gas to be injected into wells to boost output.

Adco began a pilot study in the fourth quarter of 2009 to inject carbon dioxide into a pilot well.

The Adco concession is also important as part of UAE plans to boost production capacity to 3.5 million barrels per day (bpd) by 2017, from a current capacity that is less than 3 million bpd. Abu Dhabi accounts for more than 90 per cent of the UAE’s crude output.

International oil majors can play a big role in providing EOR technology that will be needed as the UAE seeks to ramp up production.

For some of the international partners, the production from Adco is becoming increasingly important to their global total production, Mr Quin added.

“With BP selling out of assets on a global basis, you could see that Adco has become relatively more important to its portfolio as time has progressed,” he said.

“Partex’s 2 per cent stake in Adco is worth a mere 26 per cent of their global production, so they have the biggest exposure to lose in the new world potentially.”