Abu Dhabi Said to Seek $7 Billion in Latest Onshore Oil Bids

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Abu Dhabi is seeking about $7 billion in payments from foreign companies for production stakes still to be awarded in the emirate’s biggest onshore oil fields, two people with knowledge of the situation said.

The sheikdom’s state producer Abu Dhabi National Oil Co. gave bidders until Tuesday to match a $2.2 billion signing bonus that Total SA agreed to pay for a 10 percent share in the concession, said the people, who asked not to be identified because the information is confidential. Royal Dutch Shell Plc submitted a revised bid by the deadline, according to two other people with direct knowledge of the offer. Korea National Oil Corp. also said it bid. A media official at Adnoc, as the company is known, and a Shell spokesman declined to comment.

Paris-based Total is the only company to be awarded a stake in the new venture so far. Total declined to disclose its contract terms because they are confidential, according to a Paris-based spokeswoman. Adnoc is seeking more partners, which together with Total, would collectively hold as much as 40 percent of the project, the people said. Additional partners would pay Adnoc close to $7 billion in signing bonuses for 30 percent of the concession, the people said.

Adding Capacity

Middle Eastern oil producers are adding capacity to pump crude for export amid an oversupply that has cut prices by 47 percent in the last six months. Abu Dhabi, capital of the United Arab Emirates, plans to increase production capacity to 3.5 million barrels a day by the end of 2017 from about 3 million now. Adnoc said in January when it awarded Total a stake in the project that it would “soon” name other partners.

Korea National Oil submitted a revised bid for the concession by the deadline, Choi Hong Seok, a spokesman for the Ulsan, South Korea-based company, said Wednesday by phone, without providing further details of the offer. Adnoc Director General Abdullah Nasser Al Suwaidi said Feb. 9 that his company had asked other bidders to match the terms of its deal with Total and submit their revised bids by Tuesday.

Adnoc and its partners will split investment in the fields and receive barrels of crude according to their respective stakes, the people said. Foreign partners will receive a fee of about $2.85 for each barrel of crude produced, International Oil Daily reported earlier Wednesday. IOD reported the amount of Total’s signing bonus.

Total Payment

The bonus Total agreed to pay is based on a 10 percent stake in the concession, and any bidders awarded smaller shares would pay amounts proportionate to their stakes, the people said. Adnoc asked each bidder to submit offers for stakes of 5 percent and 10 percent, they said.

“Abu Dhabi has some of the largest oil fields in the world, and these deposits should be viewed as providing stable and reliable production,” Chris Gunson, an Abu Dhabi-based energy lawyer at Pillsbury Winthrop Shaw Pittman LLP, said Wednesday by phone. The signing bonus Adnoc is seeking “is not outside what you’d expect, since these are certain barrels with no exploration involved.”

Total, along with Shell, BP Plc and Exxon Mobil Corp. were all partners in a previous concession that operated the same onshore fields for 75 years until it expired in January 2014. All four companies were among 11 that Adnoc invited in 2012 to bid for the new concession. Portugal’s Partex Oil & Gas, a fifth partner in the original venture, wasn’t invited.

U.A.E Reserves

The U.A.E. holds about 6 percent of global oil reserves, mostly in Abu Dhabi. The 15 deposits in the new concession will produce 1.8 million barrels a day in 2017, up from 1.6 million barrels today, Adnoc and Total said Jan. 29. Adnoc is spending about $22 billion on projects to boost onshore oil and natural gas output and export capacity, Omar Suwaina Al Suwaidi, deputy director for strategy, said in Abu Dhabi on Nov. 11.

Other companies invited to bid were China National Petroleum Corp., Japan’s Inpex Corp., Norway’s Statoil ASA, Occidental Petroleum Corp. of the U.S., Russia’s OAO Rosneft and Eni SpA of Italy.