Adnoc awards offshore block rights to Japan's Cosmo

Previous concessions were awarded to Occidental and a consortium of Eni and PTTEP as part of a second licensing round

3rd block bid award to Japan’s Cosmo Energy. Courtesy ADNOC
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Abu Dhabi National Oil Company awarded offshore block exploration rights to Japan's Cosmo Energy as part of its second upstream licensing round.

Cosmo E&P Albahriya, the Japanese firm's wholly owned subsidiary, paid Dh532 million ($145m) towards exploration and appraisal drilling, including a participation fee for Block 4, which covers an offshore area of 4,865 square kilometres northwest of Abu Dhabi.

The award follows allotment of concessions to US energy firm Occidental as well as a consortium of Italy's Eni and Thai explorer PTTEP. Adnoc launched its second licensing round in May 2019, offering five blocks, spanning an area of around 34,000 square kilometres.

Offshore Blocks 3, 4 and 5, as well as onshore Blocks 5 and 2 were part of the bid round, with the latter offering two separate licensing opportunities for conventional and unconventional hydrocarbons.

"Cosmo was selected after a very competitive bid round. They bring expertise and understanding of our offshore environment, technology, and market access," said Dr Sultan Al Jaber, group chief executive at Adnoc and minister of industry and advanced technology.

The agreement with Cosmo, a longstanding player in Abu Dhabi's oil and gas industry, is built on the strategic bilateral relationship between the UAE and its biggest importer of energy products.

Japan first imported oil from the UAE in the early sixties, when crude from the Umm Shaif offshore field was delivered to the country. The world's third-largest economy imports 30 per cent of its crude from the UAE.

Cosmo will have the rights to hold a 100 per cent stake in Block 4 in the exploration phase, with Adnoc reserving the option to take a 60 per cent interest during the production phase. Cosmo will have a 35-year lease for the block from the start of exploration, Adnoc said.

Cosmo group chief executive Hiroshi Kiriyama said the company was optimistic about the potential value of Block 4.

"We are also certain that our success in this block can be crystallised by creating the synergies with Cosmo group’s existing oilfields and Mubarraz island which are operated by our affiliate, Abu Dhabi Oil Company," he said.

Cosmo, in which Abu Dhabi's Mubadala Investment Company holds a 20.8 per cent stake, also has an interest in the Bunduq Company, which operates an offshore concession.

As part of its latest investment, Cosmo will "leverage and contribute financially and technically" to Adnoc's mega seismic survey.

Data already acquired from the 3D survey over a large part of the block combined with its proximity to existing oil and gas fields, suggests the concession area has "promising potential."

Blocks offered under Adnoc's second licensing round hold "multiple billion barrels of oil and multiple trillion cubic feet of natural gas", according to seismic survey as well as exploration and appraisal well data.

The award to Cosmo is the first be approved by Abu Dhabi's newly-formed Supreme Council for Financial and Economic Affairs.

Adnoc has other upstream agreements with Japanese firms, including Inpex, which holds an interest in onshore Block 4.

The Abu Dhabi firm also stores around 8 million barrels of crude at facilities in Japan following the renewal of an agreement with the country's Agency for Natural Resources and Energy.

Cosmo is also exploring the potential to price oil under the newly-set-up ICE Murban Crude Oil Futures.