The head of Total said on Monday the company had taken on a larger part of Abu Dhabi’s onshore oil concession to support the emirate’s plans to increase overall production.
Abu Dhabi National Oil Company (Adnoc) has been keen to go ahead with its expansion projects, even as the oil price collapse over the past two years has dramatically curbed investment appetite among big oil companies.
The French oil major was the first to win a slice of Abu Dhabi’s major onshore oilfields – the Abu Dhabi Company for Onshore Petroleum Operations Limited (Adco) – at the beginning of last year when it took a 10 per cent share and lead management for two of the major oilfield asset groups, South East and Bu Hasa, which together cover about two thirds of the concession’s output.
Although terms have not been officially confirmed by either party, Total is reported to have paid more than US$2 billion for the stake and terms that meant it paid about $2.85 per barrel. Adnoc, which owns 60 per cent of Adco, last year also awarded concessions of 5 per cent to Inpex of Japan and 3 per cent to GS Energy, which is backed by Korea’s national oil company.
But other oil majors, including BP and Royal Dutch Shell, which had been partners in the previous concession, baulked at the terms as oil prices fell precipitously last year, although talks have been continuing.
Patrick Pouyanné, Total’s chief executive, said the company has stepped in to manage on an interim basis the Bab integrated asset to keep expansion on track and to help it improve its return. Bab is to the south-west of Abu Dhabi city and is the largest onshore field by area, 1,200 square kilometres between Madinat Zayed and Mirfa. It is both an oil and gasfield and oil production from it accounts for about a quarter of Adco capacity, says Adco’s website.
“We are interim leader on Bab … and that is one way you can improve your returns,” said Mr Pouyanné, at the Abu Dhabi International Petroleum Exhibition and Conference (Adipec).
“The objective was to help Adnoc put into place all of the plans that we have approved because when we came into the two [assets] with Adco it was a vision that the production would increase so it is in our interest, of course, to help Adco to increase its production, it is why we offered to bring in more people,” he said.
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See a gallery of the first day of Adipec 2016 here
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Last week, Adnoc said the Supreme Petroleum Council approved its five-year plan, including expansion of Adco and its offshore oilfields to 3.5 million barrels per day by 2018 from 3.1 million bpd currently. Adco is expected to raise output to 1.8 million bpd from 1.6 million bpd when the expansion plan began.
Some projects have been slowed and Adnoc has said there is no rush to award new shares in Adco while the market remains oversupplied.
Mr Pouyanné said he expects the Bab arrangement to last until Adnoc agrees terms with a new partner. “I have no doubt that [Adnoc’s chief executive] Sultan [Al Jaber] and his teams are working on getting the rest of the 40 per cent allocated and we will operate Bab on an interim basis until a new one comes into the picture.
More broadly, Mr Pouyanné said he had been working closely with Adnoc’s chief executive, who was appointed earlier this year, on plans to streamline Abu Dhabi’s operating companies and to look for opportunities to expand to meet the UAE’s goals of educating its workforce and diversifying its energy portfolio, as well as the broader economy.
“What Dr Sultan is trying to do with Adnoc is like transforming it into an international oil company [IOC]” from a public sector organisation, Mr Pouyanné said. “But it is not only a matter of having us deliver the technologies. You have to have teams to transfer the competencies so that it can be like a real IOC.”
Though there has been much of the oil market cycle bottoming out, and declining industry investment leading to another sharp uptick, Mr Pouyanné was sceptical and sees further room for cutting.
“I’m not sure we are going out of the oil glut yet. Last year we were at $55 a barrel and everybody was complaining, this year we go from $45 to $50 and people are getting excited. We are in a time of a lot of volatility but supply is still strong. Yes, we are rebalancing the market but still not there.”
amcauley@thenational.ae
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ABU DHABI OIL, Adipec 2016: The National's full coverage
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■ Dearth of energy investment could trigger soaring oil prices, says UAE Energy Minister
■ Central bank policies may be a roadblock to oil investment, says Yergin
■ Saudi market grows in importance for ABB
■ Abu Dhabi to step up petchems output
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