Abu Dhabi to Run Onshore Oilfields as Foreign Tie-Ups End

Abu Dhabi’s 75-year oil-extraction agreement is expiring, leaving the largest U.S. and European producers without direct stakes in the emirate’s onshore fields.

Once the arrangement expires, Abu Dhabi National Oil Co. will produce and sell all crude from the deposits, ending partnerships with BP Plc (BP/), Royal Dutch Shell Plc (RDSA), Exxon Mobil Corp. (XOM) and Total SA (FP), the state-run Emirates News Agency reported.

The end of the accord in the United Arab Emirates, the Organization of Petroleum Exporting Countries’ fourth-largest supplier, further weakens the role of international companies in the group as producing nations seek to retain more of their oil wealth. Saudi Arabia and Kuwait, OPEC’s first- and third-biggest suppliers, are shut to foreign investment in crude extraction.

The companies are now focusing on securing new production deals in Abu Dhabi. International producers are among 11 bidders for new accords that would allow them to keep pumping oil in the Persian Gulf emirate. The bidding process may take until January 2015, Abdulla Nasser al-Suwaidi, director-general of the national oil company, known as Adnoc, said in November.

Abu Dhabi has pumped oil from its onshore fields under concession deals with Exxon, Shell, Total, BP and Portugal’s Partex Oil & Gas -- or their predecessors -- since January 1939. Adnoc became a partner in the 1970s, joining with the companies to form Abu Dhabi Co. for Onshore Oil Operations, or ADCO. That venture was responsible for extracting 1.5 million barrels a day of Murban grade crude, the U.A.E.’s main blend.

‘Enormous Reserves’

The U.A.E. is “one of the last remaining countries where international oil companies can directly participate in the upstream sector,” Christopher Gunson, an Abu Dhabi-based energy lawyer at Pillsbury Winthrop Shaw Pittman LLP, said yesterday by phone. Abu Dhabi’s “enormous reserves mean that it will produce and export crude until at least the end of this century.”

ADCO will continue to operate the fields on behalf of Adnoc without the international partners, Adnoc’s al-Suwaidi said at a ceremony marking the end of the concessions, according to the Emirates News Agency, or WAM. Adnoc has held a 60 percent stake in ADCO, with the five foreign partners owning the remaining 40 percent. Partex wasn’t invited to bid for a new concession.

Representatives of the partner companies also attended the ceremony, WAM said. Other bidders for the new concessions are Korea National Oil Corp., Japan Oil Development Co., China National Petroleum Corp., Norway’s Statoil ASA, Occidental Petroleum Corp. of the U.S., Russia’s OAO Rosneft and Italy’s Eni SpA, according to Energy Intelligence Group.

An Eni press officer yesterday confirmed that the Rome-based company is bidding. Shell and BP declined to comment. Total couldn’t be reached.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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