China expresses strong interest in Abu Dhabi oil and gas concessions

Abu Dhabi National Oil Company has received strong interest from Chinese energy firms for onshore and offshore oil and gas concessions being offered in the first-ever round of competitive bidding proposed as part of its new partnership model.

“During the roadshows following our block bids announcement, it was reassuring to see a high number of delegates from China, demonstrating a great interest in this partnership and investment opportunity in Abu Dhabi,” Tayba Al Hashemi, acting chief executive of Adnoc unit Al Yasat Petroleum told the inaugural Abu Dhabi Global Market’s Belt-and-Road financial forum in Beijing.

“The blocks bid approach is different and new to Adnoc. [But] it is a win-win for our partners as the successful bidders will gain the right to explore … partners will have the opportunity alongside Adnoc to benefit from any discoveries…. and grow with us.”

In April, Abu Dhabi, home to about 6 per cent of the world’s proven oil reserves, launched the competitive bidding for oil and gas blocks, as it looks to engage new partners across various segments of its energy value chain. The successful bidders will get the exploration rights and could be invited to develop and produce any discoveries from the blocks, which contain billions of barrels of oil and trillions of cubic feet of natural gas, Adnoc said at the time.

Bids for four onshore and two offshore blocks, spanning a combined area of 30,000 square kilometres, are due by October and the first bidding round is expected to conclude this year.

Abu Dhabi has a five-year spending programme of $109bn approved last year for exploration of its sour gas reserves as well as development of refining and chemicals projects at home and abroad. Adnoc will look to engage partners, particularly those currently involved in upstream projects to help double its refining and triple its petrochemicals capacity by 2025.

Ms Hashemi, who in April took charge of Al Yasat, Adnoc’s first joint venture with state-controlled China National Petroleum Corporation (CNPC), said Adnoc values partnerships that gives it the access to technology, markets and capital and offer long term investment opportunities with attractive and stable returns to its partners.

China, she said, always had an important role in this strategy.

CNPC in March picked up two stakes worth Dh4.3bn in offshore fields from Adnoc’s erstwhile Adma-Opco concessions, in which Abu Dhabi awarded stakes to players from its consuming markets such as India with the Abu Dhabi firm retaining a 60 per cent interest.

PetroChina, which is majority-owned by CNPC, was awarded a 10 per cent interest both in Umm Shaif and Nasr as well as the Lower Zakum offshore concessions. PetroChina, China’s biggest oil producer with concessions in Iraq, paid a participating fee of Dh2.1bn to enter Umm Shaif and Nasr and Dh2.2bn for offshore Lower Zakum, Adnoc said at the time.

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These awards, she said, are further expanding the company’s partnership with China’s oil and gas firms, and helping Adnoc enhance its ability to get greater returns from its hydrocarbon assets.

Previous partnerships are bearing fruits now and Al Yasat Petroleum, which was formed in 2014 and oversees production from two concession areas in Abu Dhabi, has already started production.

“Just a month ago, we produced the first oil from Yasat field and first oil shipment to China in few days,” she said without giving further details of the field’s current production capacity.

China is the world's biggest oil importer, with its crude consumption set to rise 4.6 per cent year-on-year to 12.05 million barrels per day this year, according to estimates by CNPC’s research division. Consumption of refined products such as plastics and compounds, which are vital for Chinese growth and development of its expanding middle class, is forecast to grow about 31 per cent year-on-year to 47.8 million tonnes in 2018.

The next round of growth and partnerships with Adnoc, she said, will come in the downstream sector, as Adnoc makes significant investment over the next year to expand its downstream footprint. The company is set to announce its downstream strategy at a global forum of chief executives on Sunday.

Chinese firms have expressed significant interest in the unveiling of “significant co-investment opportunities” at the event, said Ms Al Hashemi.

“It is reassuring to see high interest and large number of registrations [for the event] from China, ranging from oil and gas to the banking sectors,” she added.

At the heart of the downstream ambitions is the Ruwais refining and petrochemicals complex which Adnoc wants to transform into the world’s largest integrated refining and chemicals site by 2025 -- doubling its refining capacity and trebling its chemicals production.

“As global demand for energy continues to rise, it is down to smart investments and partnerships to harness the opportunities ahead of us and unlock value in our resources,” she said. “China and Abu Dhabi have a mutual interest in ensuring a stable and secure supply of oil and gas.”