Adnoc Assessing Bids for 40-Year Oil Concessions as Prices Sink

Abu Dhabi National Oil Co. is evaluating bids by foreign companies for stakes in the emirate’s biggest fields and has yet to recommend any offers to the government for approval.

BP Plc, Total SA and several companies based in Asia are among those seeking to participate with state-run Adnoc in its on-shore production of crude as early as January. Abu Dhabi holds most of the crude deposits in the United Arab Emirates, an OPEC member that holds about 6 percent of global reserves.

“We are in the process of evaluating,” Adnoc Director General Abdulla Nasser Al Suwaidi said today in Abu Dhabi. Adnoc hasn’t forwarded recommendations yet to the Supreme Petroleum Council, the country’s highest authority for energy policy, for final approval, he said. Al Suwaidi declined to specify the number of bids under review.

Abu Dhabi plans to boost production capacity for crude to 3.5 million barrels a day in 2017 from about 3 million barrels a day today and also raise output of natural gas. Middle Eastern states including the U.A.E. are expanding capacity to produce oil and gas partly to meet growing domestic demand for fuel to run power plants and for transportation.

Abu Dhabi’s planned 40-year concession agreement offers foreign companies access to one of the few places in the Persian Gulf where the largest U.S. and European producers still hold direct stakes in oil fields. Saudi Arabia and Kuwait, fellow members of the Organization of Petroleum Exporting Countries, don’t allow foreign investment in production of crude.

Price Slide

Adnoc sees the recent slide in oil prices as a sign of “temporary market instability” and won’t cut investment in projects because of it, Al Suwaidi said. Brent crude futures have dropped 29 percent since June 19, amid a supply glut.

The producer has been seeking a new line-up of partners to develop Abu Dhabi’s on-shore deposits after the expiration in January of a joint-venture agreement with BP, Total, Exxon Mobil Corp., Royal Dutch Shell Plc, and Partex Oil & Gas.

Abu Dhabi has pumped oil under concession deals with those companies or their predecessors since 1939. Adnoc became a partner in the 1970s, joining with them 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.

Adnoc invited 11 companies to bid for concessions, and all of them made offers, it said in November 2013 as the renewal process got under way.

Doing ‘Homework’

“If you are going to choose a partner, you must do all your homework, your due diligence, to make sure that the choice is right from the first time,” Al Suwaidi said. “We cannot make a wrong choice so we have to take time.”

Ali Khalifa al-Shamsi, Adnoc’s strategy and coordination director, said separately today that he expected the winners “to be announced before the end of the year or beginning of next year.” Adnoc has already finished evaluating the bids, he said in Abu Dhabi.

Neither al-Shamsi nor Al Suwaidi offered an explanation for their differing assessments of the status of Adnoc’s evaluation of the bids.

Bidders include four of the original international partners -- BP, Shell, Total and Exxon -- with the fifth, Partex, not invited. Others are China National Petroleum Corp., Korea National Oil Corp., Japan Oil Development Co., Norway’s Statoil ASA, Occidental Petroleum Corp. of the U.S., Russia’s OAO Rosneft and Italy’s Eni SpA.

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