GS Energy said on May 13 that it signed an agreement with Abu Dhabi National Oil Co. to acquire a 3 percent stake in Abu Dhabi’s largest onshore oil-field concession for 40 years, in a consortium with Total of France (10 percent) and Inpex of Japan (5 percent).
The ADNOC owns 60 percent of the land mining district while other companies share 40 percent stakes in the onshore oil bloc in Abu Dhabi, the United Arab Emirates (UAE).
This particular oil-field concession with Total and Inpex is a $22 billion venture.
The energy unit of South Korea’s GS Holdings Corp. will gain access to about 50,000 barrels of oil per day for its share in the 40-year concession, the company said Jan. 13 in an e-mailed statement. GS Energy will pay state-owned Abu Dhabi National Oil Co. a signing bonus of $670 million, it said in a regulatory filing in Seoul. Korea National Oil Corp. said it’s joining GS Energy in the venture.
An Adnoc spokesman had no immediate comment.
Abu Dhabi is seeking new partners to replace some of the Western companies that pumped oil in the emirate for 75 years, until their last production agreement expired in January 2014. By selecting GS Energy and Inpex, Abu Dhabi is for the first time awarding stakes in its biggest onshore producing fields to companies from Asia, where the emirate sells most of its crude.
“It is possible that the awarding of concessions is to some degree looking to match the geography of the client base,” Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas SA, said May 14 from London. “In the end, it is down to the terms of agreement and whether they are mutually agreeable to both parties.”
Technical Support
State-run Korea National Oil will provide technical support to GS Energy and has the right to buy as much as 30 percent of GS Energy’s stake in the concession over the next five years, Joo Hyoung In, a KNOC spokesman based in Ulsan said by phone.
Inpex won a 5 percent stake in the Abu Dhabi venture last month. Total secured a 10 percent interest in January.
The awards to Inpex and GS Energy represent a shift away from Abu Dhabi’s traditional partners. The emirate, the largest in the United Arab Emirates, has pumped oil from its onshore fields under concession deals with BP, Exxon Mobil, Royal Dutch Shell, Total and Portugal’s Partex Oil & Gas — or their predecessors — since January 1939. Adnoc joined them in the 1970s, forming the partnership that extracted Murban crude, the U.A.E.’s main blend, until the concession agreement expired last year.
Boosting Capacity
Adnoc and its partners will split future investment in the fields and receive crude according to their respective stakes, two people familiar with the situation said in February. The foreign partners will also receive about $2.85 for each barrel of crude produced, International Oil Daily reported Feb. 11. Neither GS Energy nor Korea National Oil provided such details.
Abu Dhabi is raising production capacity amid a global crude glut that contributed to a price collapse of almost 50 percent last year. The Organization of Petroleum Exporting Countries, of which the U.A.E. is the third-biggest producer, plans to meet June 5 to assess the market after leaving its output ceiling unchanged in November.
Adnoc is spending about $22 billion to increase onshore oil and gas production and export capacity, Omar Suwaina Al Suwaidi, the company’s deputy director for strategy, said Nov. 11.
GS Energy, with Korean National Oil, is already a partner with Adnoc in exploration blocks in Abu Dhabi, and the group plans to produce its first oil there in 2017. Korea Electric Power Corp. is building four nuclear reactors for Abu Dhabi, with the first one scheduled to start operating in 2017. Korean companies also have been awarded contracts to build refineries and other energy facilities in the emirate.
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