Abu Dhabi's Supreme Petroleum Council has rejected a proposal to extend the emirate's onshore concession by a year, allowing only a few months to evaluate bids before the existing contract expires.
Oil tender delay plan rejected
Abu Dhabi's Supreme Petroleum Council (SPC) has rejected a proposal to extend the emirate's onshore concession by a year, allowing only a few months to evaluate bids before the existing contract expires.
Earlier this year Abu Dhabi National Oil Company (Adnoc) asked the SPC, the emirate's highest decision-making body for hydrocarbons policy, to extend the concession for one year to allow enough time for a complex tender process for giant fields that have caught the eye of companies such as Statoil and Korea National Oil Corporation.
But the SPC's decision to stick to the original expiration date of January 2014, as first reported by Dow Jones Newswires, means Adnoc will have to rush its evaluation of bids expected in the autumn or simply allow the concession to expire without a formal operator, which it has done in the past.
"It's a tight deadline," said Christopher Gunson, an oil and gas lawyer with Pillsbury in the UAE. "They want to put the pressure on all bidders, the new and the old."
The strategy may put particular pressure on the current operators invited to bid - ExxonMobil, Royal Dutch Shell, BP, Total - because they will not be able to count those reserves on their books once the concession expires, said one Abu Dhabi-based oil and gas executive. For some, as much as 10 per cent of global reserves are in the emirate.
A one-year extension may also be impractical, since existing shareholders would be unlikely to make substantial investments without knowing they will be able to make a return over the next 20 or 30 years.
In the meantime, Adnoc can independently operate the fields, which include Bab, Asab, Bu Hasa and Shah, said an executive from a bidding company.
Abu Dhabi let a gas processing project expire in 2008, only renewing it a year later on a backdated contract.
Adnoc sent out formal tender invitations, including geophysical data, to companies including the four biggest foreign shareholders and China National Petroleum Corporation, Korea National Oil Corporation, Japan's Inpex, Norway's Statoil and America's Occidental in March and expects bids by autumn. Last month Abdulla Nasser Al Suwaidi, the director general of Adnoc, said the company aimed to award the rights this year.
In relicensing the concession held by an elite club of western majors for 75 years, Abu Dhabi must balance strategic ties with the Asian countries which today consume most of the emirate's exports and historical relationships with western powers that offer help in other arenas such as defence.
* With additional reporting by Florian Neuhof