ExxonMobil and Inpex win improved deal at Abu Dhabi’s Upper Zakum oilfield
ExxonMobil and Japan’s Inpex have successfully negotiated a longer and better paid concession at the Upper Zakum oilfield, a cornerstone of Abu Dhabi’s ambitious output expansion.
The concession for the offshore field, one of the biggest in the world with an estimated 50 billion barrels of reserves, has been extended by an extra 15 years to December 2041, Inpex wrote in a press release yesterday.
Alongside the majority partner Abu Dhabi National Oil Company (Adnoc), ExxonMobil holds a 28 per cent stake and Inpex’s subsidiary, Japan Oil Development Company, a 12 per cent stake in Upper Zakum, where a technically complex plan to replace nearly 100 wellhead towers with four massive artificial islands is under way.
The new terms also include raising the amount the partners get paid to US$2.85 a barrel from the previous $1, according to the industry publication Energy Intelligence.
The agreement brings to an end years of negotiations between Adnoc and the American major over improving the field’s $1 per barrel payment, the norm among Abu Dhabi oil contracts – including the 75-year-old onshore concession that expired earlier this month and is due to be rewarded later this year.
But it would be a mistake to assume that Abu Dhabi would improve the terms of the Adco concession, as the onshore concession is called, exactly as it has at Upper Zakum, said Adrian Nizzola, an oil and gas lawyer at Simmons & Simmons in Abu Dhabi.
“Adnoc’s really smart: they know that every field is different and it’s really about matching the right partners to the right field,” said Mr Nizzola. “I don’t think everyone’s going to have an expectation that they can get more. I think this a recognition that ExxonMobil is the right partner for that field, they have a long history there, they understand the field very well and it would be difficult to bring in someone else.”
A core part of Abu Dhabi’s target of expanding production to 3.5 million barrels of oil per day by 2017 from 3 million bpd today, Upper Zakum will require relatively challenging techniques ranging from long-range horizontal drilling to water flooding. The partners are targeting a rise in production to 750,000 bpd by 2017 from today’s 550,000 bpd and are studying the prospect of ramping up to 1 million bpd by 2024.
The announcement came as Toshimitsu Motegi, Japan’s minister of economy, trade and industry, visited the emirate for the World Future Energy Summit.
Updated: January 21, 2014 04:00 AM