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Abu Dhabi, UAEMonday 17 December 2018

Exclusive: Wintershall and DEA eye $3bn in spending over five years

Germany's largest energy company aims to list following the merger set for completion in the second quarter of 2019

Wintershall-DEA will look to raise production capacity to 800,000 barrels of oil equivalent per day following merger, said chief executive Mario Mehren. Pawan Singh / The National
Wintershall-DEA will look to raise production capacity to 800,000 barrels of oil equivalent per day following merger, said chief executive Mario Mehren. Pawan Singh / The National

Germany’s biggest energy company Wintershall will earmark up to $3 billion (Dh11.02bn) in capital expenditure globally over the next five years, following its merger with DEA, as the combined entity eyes production capacity of 800,000 barrels of oil equivalent per day.

Wintershall’s parent BASF, the world’s largest chemicals company, agreed in September with Russian-owned LetterOne to merge their subsidiaries DEA and Wintershall, a transaction pending anti-trust approvals in the territories they operate.

Wintershall, which has an expenditure ranging between $1bn to $1.5bn, is looking to double that over the next three to five years, chief executive Mario Mehren told The National.

“It all comes with the caveat that we’re still two separate companies and we need to have an in-depth look into our portfolio and see what are our priorities, but we want to grow,” he said.

“This [merger] process is hopefully going to take no longer than six to nine months, which will bring us then to the second quarter 2019 for closing of the deal.”

The merger will leave Wintershall DEA with “roughly 600,000 boepd” collective production capacity, a figure that Mr Mehren said the company was targeting to raise to “800,000 boepd in five years’ time frame”.

“We will have this year somewhere below 500,000 boepd, but we have hit in the last weeks for the first time in our history that kind of magic threshold on a daily basis,” he added.

Wintershall, which has extensive experience exploring and processing sour gas in Germany is scouting for opportunities in Abu Dhabi, which opened a licensing round for six oil and gas blocks earlier this year and has largely sulphurous reserves. Sour gas has a high level of sulphur that is extracted to use gas for consumption.

“We are in general having good discussions with Adnoc [Abu Dhabi National Oil Company] on where our capabilities and skills fit with Adnoc’s requirements and when it comes to sour gas, we have more than 40 years of experience in sour gas fields in Germany,” said Mr Mehren.

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Read more:

Wintershall seeks partnerships in Abu Dhabi's sour gas developments

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Adnoc awards Eni 25% stake in multi-billion dollar gas concession

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The company has tested and appraised two wells in the western sour gas field of Shuwaihat in partnership with Adnoc, an exercise that had found possibilities for “significant volumes of gas condensate", said Mr Mehren. Condensate, a liquid similar to oil found with gas, but fetches a higher price than crude because it is easier to refine into by-products

He declined to specify volumes but said there could be possible tie-ups with other large ongoing gas projects in Abu Dhabi in fields such as Hail and Ghasha.

"Those exactly are discussions that are currently ongoing with Adnoc,” said Mr Mehren.

Adnoc awarded Italian energy company Eni a 40-year 25 per cent stake in the multibillion dollar Ghasha project, Abu Dhabi’s first ultra-sour gas offshore project.

Adnoc was looking for more partners to work on the gas concession, its group chief executive said in a statement earlier this month.

Abu Dhabi’s state producer also awarded French oil major Total a 40 per cent stake to develop the Ruwais Diyab gas concession.

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Read more:

Wintershall seeks partnerships in Abu Dhabi's sour gas developments

Adnoc awards 40 per cent stake to Total for unconventional gas field

Adnoc awards Eni 25% stake in multi-billion dollar gas concession

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The awards and interest of European energy companies in Abu Dhabi’s gas potential follows Adnoc’s announcement earlier this month of the discovery of up to 15 trillion cubic feet of gas, an addition of 7.1 per cent to existing reserves. Adnoc plans to add 1 billion cubic feet per day of natural gas before the end of the next decade, as it seeks gas self-sufficiency.

Wintershall, whose only asset in the Middle East presently is in Libya said it was actively pursuing opportunities in the UAE and had offered “feedback” to Adnoc on its ongoing licensing round.

Wintershall DEA, which plan to launch an initial public offering post merger have frozen their interest in Iran, where they had earlier signed a preliminary agreement with the state-owned National Iranian Oil Company following US sanctions against Tehran.

"We signed a memorandum of understanding, which has expired and given the current situation, the US position on sanctions unfortunately we have no means to enter Iran, but when you talk about sweet spots, there’s definitely a lot of potential there but not available to us,” he said.