Japan's Inpex has acquired a 5 per cent stake in Abu Dhabi's prime onshore oilfields — known as Adco — paying an upfront fee of US$1.1 billion for its share.
It joins Total in the 40-year Adco concession, after the French company was awarded a 10 per cent share this year, when it paid a fee of about $2.2bn.
Inpex was one of a number of companies still in contention for a stake of either 10 or 5 per cent after Abu Dhabi National Oil Company asked them to match Total’s terms, which whittled down the field in recent weeks.
An Adnoc spokesman said the company had no comment.
The companies still thought to be in contention for a 10 per cent stake are the major partners in the previous concession, BP and Royal Dutch Shell, which expired after 75 years at the end of 2013. Korea National Oil Company and PetroChina are being considered for the smaller stake, according to industry sources.
Inpex is the largest private sector oil company in Japan, which already has deep energy ties with the UAE. Last year, Japan bought about 30 per cent of the UAE’s entire oil output, importing more than $40bn of UAE crude oil and petroleum products, according to the Japan External Trade Organization.
Japan is the world's third largest oil importer, after the US and China, and the UAE accounted for about 20 per cent of Japan's oil imports of 4.3 million barrels per day last year.
Inpex, via its subsidiary Japan Oil Development Company, already owns a 12 per cent stake in the UAE’s major offshore field block, Adma, a concession that runs through 2041 after it was extended by 15 years at the beginning of last year.
“This new acquisition in Abu Dhabi, positioned as one of the core areas for Inpex’s petroleum development and production operations, is highly significant in terms of the company’s growth strategies, and also largely contributes to the long-term, stable supply of energy to Japan,” said Toshiaki Kitamura, the Inpex chief executive.
Mr Kitamura said Inpex received considerable support from the Japanese government and added that the government’s Japan Oil, Gas and Metals National Corporation (Jogmec) would provide an unspecified amount of financial support for the deal.
Although the company did not confirm it, the Japanese broadcaster NHK reported earlier in Tokyo that Inpex agreed to pay a $1.1bn fee for its Adco stake. That report followed comments by the trade minister Yoichi Miyazawa.
Adco comprises 15 onshore fields and is one of the world’s largest oil deposits, with 11 fields currently in production at a rate of 1.6 million barrels per day and four more under development.
Adnoc has set ambitious targets in terms of recovering oil from its vast reservoirs, estimated at more than 90 billion barrels by the US government’s Energy Information Agency.
Adnoc wants operating companies to achieve a 70 per cent recovery rate, which though well above industry average recovery rates of 40 per cent, is a rate that some of the more advanced international oil companies have been able to attain in giant fields elsewhere.
The next phase of development for the Adco fields is to raise production by the end of 2017 to 1.8 million bpd.
Last week, Adnoc’s top offshore executive said the company is expecting investment in offshore fields of $25bn over the next five years to raise production from its two largest offshore fields to 1.6 million bpd by 2017-18, a 33 per cent increase from about 1.2 million bpd currently.
Japan also has a strategic deal with the UAE and Saudi Arabia, whereby Japan has a three-year lease to store 6.3 million barrels for each of these producers and, in return, has priority over the supply in case of emergency.
Japan government and private sector oil storage is the highest per capita of the major consuming countries, with stocks estimated at more than 420 million barrels.
The country’s oil demand has been in structural decline, as has that of most of the developed world, but demand rose after the 2010 tsunami and earthquake that led to the Fukushima nuclear disaster and the subsequent shutdown of all of its 48 nuclear reactors.
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