Abu Dhabi Taps Japan’s Inpex to Join $22 Billion Oil Project

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Inpex Corp. of Japan is joining Total SA to develop the main onshore oil deposits in the United Arab Emirates as Abu Dhabi picks new partners for a $22 billion effort to pump crude from its largest fields.

Japan’s state-backed energy explorer will take a 5 percent stake in the fields, Yoichi Miyazawa, the trade minister, said at a news conference in Tokyo Monday. The concession will give Japan access to crude from the deposits for 40 years, starting Jan. 1, 2015, Inpex and the emirate’s government-owned oil producer said in an e-mailed statement.

“It makes sense for Abu Dhabi to name an Asian partner since more of their demand is coming from there,” said Robin Mills, a Dubai-based analyst at Manaar Energy Consulting. “Inpex brings quite a lot technically, and they operate major projects.” A Chinese company could be one of the next bidders awarded a stake, he said.

Abu Dhabi, the U.A.E.’s largest emirate, is boosting crude production capacity amid a global glut that cut prices about 50 percent last year. OPEC, of which the U.A.E. is the fifth-biggest producer, plans to meet June 5 to assess the market and production levels. The group kept its output target unchanged at its last meeting in November, seeking to preserve market share, mostly among big buyers in Asia.

$1.1 Billion

Abu Dhabi National Oil Co., known as Adnoc, picked Inpex from at least 10 bidders to join it and Total in the venture. Inpex agreed to pay Adnoc a signing bonus of about $1.1 billion, Japan’s public broadcaster NHK reported Monday, without saying where it got the information.

The project “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,” Toshiaki Kitamura, Inpex chief executive officer, said in the statement.

Abu Dhabi, the U.A.E. capital, holds about 6 percent of global oil reserves. It plans to boost crude production capacity to 3.5 million barrels a day in 2017 from about 3 million now. Capacity from the onshore block in which Total and Inpex are partners will rise to 1.8 million barrels a day by then from about 1.6 million now, Adnoc and Inpex said.

Adnoc is spending about $22 billion on projects to increase onshore oil and gas production and export capacity, Omar Suwaina Al Suwaidi, the company’s deputy director for strategy, said in Abu Dhabi on Nov. 11.

Exxon, Shell

Total was a shareholder with BP Plc, Exxon Mobil Corp., Royal Dutch Shell Plc and Partex Oil & Gas in the Abu Dhabi onshore fields under a 75-year agreement that expired in January 2014. Total became the first company to gain a stake in the new concession, securing a 10 percent holding in January. Inpex wasn’t involved in the onshore projects until now.

Adnoc, which plans to retain 60 percent of the partnership, asked the remaining bidders to match the $2.2 billion signing bonus Total agreed to pay for its share in the fields, two people with knowledge of the situation said Feb. 12.

Adnoc was in advanced talks last week with two Asian bidders, while proposals “by international oil companies failed to fulfill Adnoc’s requirements and conditions,” Director General Abdullah Nasser al Suwaidi said, according to an April 20 statement from the company. China National Petroleum Corp. was among bidders for the concession, according to Energy Intelligence Group. Three calls to CNPC’s Beijing-based spokesman Qu Guangxue weren’t returned.

“China’s where the action is in terms of demand growth,” Manaar’s Mills said. China could win a stake in the concession if Adnoc wants a partner from the country likely to have the greatest future demand and if Adnoc deems the technical aspects of CNPC’s bid strong enough, Mills said.

The U.A.E., a member of the Organization of Petroleum Exporting Countries, is Japan’s second-biggest oil supplier after Saudi Arabia, according to Japan’s trade ministry. Japanese companies already have stakes in Abu Dhabi’s offshore deposits, and they buy most of its liquefied natural gas.

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