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UAE oil concessions shake-up opens door to East

UAE oil concessions shake-up opens door to East

UAE oil, gas concessions start expiring in 2014; Talks between IOCs and Abu Dhabi underway

October 1, 2011 1:10 by



Asian companies are well-placed to take more stakes in Abu Dhabi’s upcoming oil and gas concessions as the oil exporting emirate seeks stronger ties with its biggest customers and better financial terms for itself.

Western oil majors ExxonMobil , Shell and Total hold large stakes in concessions that pump most of the oil and gas which has helped transform Abu Dhabi from a sleepy fishing village into one of the world’s largest oil exporters and richest countries over the last five decades.

Abu Dhabi plans to invest $60 billion over the next five years in a bid to boost UAE’s oil production capacity from 2.7 million to 3.5 million barrels per day (bpd) and may welcome eastern companies into the cosy western oil club to make it happen.

EXCLUSIVE CLUB NO MORE
“You are not going to have a small club anymore. You will have some more upstream presence from the consumer countries. I would expect some other partnerships from Japan, South Korea and even China,” Thaddeus Malesa, a Dubai-based independent energy analyst, said.

“If you want to be tied into the future, if you want to have ties with countries with higher demand growth, you will have to let them in. That is really the consideration within the government in terms of getting the ebst all-around deal for Abu Dhabi,” Malesa said.

Almost all of crude exports out of UAE, the world’s third largest crude exporter, is sold to Asian countries, but when it comes to concessions Japanese Oil Development Co. (Jodco) is the only Asian company with a major stake in one of its four largest oil concessions.

Cosmo Oil Co , also from Japan — the leading importer of emirati oil — was awarded a minor concession in early 2011 and has stakes in a few small fields.

But analysts, sources close to the government and industry observers say companies from South Korea and increasingly import-dependent China are likely front-runners when the concessions come up for renewal in 2014.

Analysts and sources close to the government expect some shift in concession control from West to East point to a memorandum of understanding signed by ADNOC and South Korea in March which secured access to at least a billion barrels of reserves for one of the UAE’s biggest crude consumers.

BREAK UP
The UAE’s oil concessions have an unusual structure which allows producers to acquire equity stakes in return for providing much of the investment and accepting profit margins that analysts say are very tight by international standards.

Abu Dhabi National Oil Co (ADNOC) holds a controlling stake in each concession which it operates with several partners — a system which irks some oil companies who do not want to share their technology with rivals.

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