S. Korea secures Abu Dhabi Oil in huge deal
Ensures S.Korea's stakeholding in over 1 bln bbls reserves; MOU worth $97.7 bln on oil prices now -presidential office; Also agrees to develop 3 oil areas with 570 mln bbls; S.Korea to store 6 mln bbls of Abu Dhabi crude "for free"; S.Korea oil self-sufficiency rate eventually to be 15 per cent
March 13, 2011 2:50 by Reuters
South Korea, the world’s fifth-largest crude oil importer, said on Sunday that it had secured access to at least a billion barrels of crude oil reserves in an unprecedented oil deal with Abu Dhabi National Oil Company (ADNOC).
Under the memorandum of understanding (MOU), Korea National Oil Corp (KNOC) will be guaranteed stakes in technically recoverable reserves of at least 1 billion barrels of oil worth 110 trillion won ($97.68 billion) based upon current oil prices, the South Korean presidential office said in a statement.
South Korea is competing with China and India to secure energy and minerals reserves at a time when oil prices are surging.
KNOC itself, which has a substantial war chest to spend on cutting Asia’s fourth-largest economy’s almost total dependence on imported oil, recently spent $2.6 billion to buy Dana Petroleum, an oil exploration and production company.
“The partnership for 100 years, which started between the two countries thanks to the nuclear deal, has been strengthened more by today’s deal,” President Lee Myung-bak said in the statement.
Ties between South Korea and the UAE have boomed after the Gulf Arab state in December 2009 awarded a South Korean consortium the contract to build four nuclear power plants worth $20.4 billion.
The deal between KNOC and ADNOC is part of a renegotiation of a series of concessions that start to expire in 2014.
Norway’s Statoil, Denmark’s Maersk Oil, part of AP Moeller Maersk A/S, Austria’s OMV, London-listed oil and gas services firm Petrofac along with KNOC had been named as contenders for the concessions issued by the United Arab Emirates.
While the main partners of ADNOC in the UAE’s four largest concessions are U.S. ExxonMobil, Royal Dutch Shell, BP, France’s Total and the Japan Oil Development Co., analysts said they must be more competitive if they want to renew the contracts and win more after they begin expiring.
Abu Dhabi-based sources told Reuters on Saturday that South Korea was likely to secure a major oil field development contract in the United Arab Emirates, and the contract might be signed as soon as Sunday to coincide with President Lee’s visit to the UAE.
Seoul aims to finalise the deal next year. It will eventually raise the share of South Korean-owned oil imports to 15 percent of consumption from 10 percent in 2010, the statement said.
The UAE is the world’s third-largest crude oil exporter and South Korea’s second-largest supplier after Saudi Arabia.
Separately, KNOC signed a contract with ADNOC which will allow it to develop three onshore and offshore oil drilling areas in Abu Dhabi with a combined of 570 million barrels of discovered petroleum initially in place, it said.
Under the heads of terms, South Korea up to 100 percent of the fields and has the right to import 100 percent of oil to be produced in the fields in emergency, the statement added.
South Korea and Abu Dhabi also agreed to store 6 million barrels of Abu Dhabi crude oil in South Korea’s storage facilities for free and in emergency South Korea will be allowed to use it, it added. ($1=1126.0 Won)
(Written by By Cho Mee-young and Humeyra Pamuk and Edited by David Chance and Louise Heavens)