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Abu Dhabi, UAETuesday 11 December 2018

Eni awarded stakes in two Abu Dhabi offshore concessions in $875m deal with Adnoc

The interests are the first-ever in the UAE won by the Italian energy major, which has seen big successes in gas exploration offshore Egypt and Cyprus

Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces (back centre, right), Paolo Gentiloni Silveri, Prime Minister of Italy (back centre, left), Dr Sultan Al Jaber, UAE Minister of State, Chairman of Masdar and CEO of Adnoc Group (right), and Claudio Descalzi, CEO of Eni at Al Shati Palace. Ryan Carter for the Crown Prince Court - Abu Dhabi
Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces (back centre, right), Paolo Gentiloni Silveri, Prime Minister of Italy (back centre, left), Dr Sultan Al Jaber, UAE Minister of State, Chairman of Masdar and CEO of Adnoc Group (right), and Claudio Descalzi, CEO of Eni at Al Shati Palace. Ryan Carter for the Crown Prince Court - Abu Dhabi

Abu Dhabi National Oil Company awarded Eni two stakes in the emirate’s offshore concession areas in 40-year agreements for a combined $875 million, marking the Italian oil major’s entry in the UAE’s oil and gas sector, following recent wins in Egypt and Cyprus.

The Italian company won a 10 per cent stake in the Umm Shaif and Nasr concession as well as a 5 per cent share of Lower Zakum – fields that were previously part of the Adma-Opco entity.

“Our partnership with Eni, and other concession partners, will enable us to accelerate our growth, increase revenue and improve integration across the upstream value chain, as part of our ongoing transformation and build on the foundations that have been laid to deliver a more profitable upstream business,” said Dr Sultan Al Jaber, Minister of State and Adnoc group chief executive.

Eni, which joins an Indian consortium led by ONGC Videsh and Japan’s Inpex in Lower Zakum, paid a participating fee of Dh1.1 billion ($300m) for its stake. It also paid Dh2.1bn ($575m) to enter Umm Shaif and Nasr. The twin concessions will be operated by Adnoc Offshore on behalf of all partners. Adnoc will retain a 60 per cent stake across the various split concessions, with the remainder shared between various partners.

Abu Dhabi’s recent partners on the various offshore concessions up for renewal this month have so far been from Asia, reflecting the company’s pivot to secure market access in the East.

Eni’s involvement, analysts suggest, could be a way to balance Adnoc’s current mix of partners and also to bring on the Italian firm’s expertise in large-scale gas exploration offshore the Eastern Mediterranean at a time when Abu Dhabi is also strongly focussed on unlocking gas potential.

“This is the first award by

Adnoc to a major in the offshore renewal, and shows it is

looking to find a balance in its strategic partners between companies from major buyers (Japan, India) and IOCs [international oil companies] with technology and project delivery expertise,” said Tom Quinn, research

analyst in Dubai with energy consultancy Wood Mackenzie.

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Read more:

Adnoc awards Indian firm Dh1.25bn contract to develop onshore field

Adnoc awards $850m concession agreements to Japan's Inpex

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Eni, which apart from Egypt’s giant Zohr field and offshore Cyprus, also picked up politically-sensitive concessions off the coast of Lebanon has little exposure to the low-cost reservoirs of the Middle East. The Italian firm’s success in securing contracts in Abu Dhabi is set to balance its more riskier ventures around the region.

"Eni has said it is pursuing new “organic, conventional and long life-cycle” projects as part of its 2017-2020 business objectives. The [former] Adma-Opco concession fits well into this,” said Vandana Hari, founder and chief executive of energy advisory firm Vanda Insights.

"It is a major producing area and Adnoc plans to further boost its production capacity. The stake will give the Italian company a footprint in the UAE, which offers low-cost production and a stable environment for investment,” added the Singapore-based analyst.

While Eni’s focus in the region has so far been upstream development for oil and gas, its chief executive Claudio Descalzi hinted at downstream synergies with Abu Dhabi’s state oil company, saying such collaboration “would create significant added value to Adnoc’s refining assets”.

Adnoc, which plans to double refining capacity and triple its petrochemical output is expected to announce its downstream strategy “very soon”, Dr Al Jaber said last month in Abu Dhabi.

Adnoc has yet to announce partners for the remaining 15 per cent stake in Lower Zakum, 30 per cent for Umm Shaif and Nasr and 20 per cent of SARB and Umm Lulu, of which another 20 per cent was awarded to Mubadala-owned Cepsa last month.

Eni will work with its partners to raise production capacities at Lower Zakum to 450,000 barrels per day and Umm Shaif and Nasr to 460,000 bpd and 500 million square feet of gas per day by an undefined timeline.