Abu Dhabi Broadens Oil Partnerships in $1.5 Billion Cepsa Deal

Updated on
  • Cepsa to take 20% stake in Sateh Al Razboot, Umm Lulu fields
  • Spanish refiner and producer owned by Mubadala Investment

Sultan Al Jaber, chief executive officer of Abu Dhabi National Oil Co. (ADNOC). 

Photographer: Kiyoshi Ota/Bloomberg

Abu Dhabi’s selection of a Spanish company to help it develop offshore oil fields is a sign of the Gulf producer’s push to diversify its partnerships while working to boost production capacity and secure long-term markets for crude.

Government-owned Abu Dhabi National Oil Co. awarded a second slice of its offshore concessions in as many weeks, this time to refiner and producer Cia Espanola de Petroleos SA for a $1.5 billion fee, the companies said Sunday. Indian companies got the first slice in a $600 million deal on Feb. 10. Madrid-based Cepsa, owned by Abu Dhabi’s Mubadala Investment Co., will take a 20 percent stake in development rights for the Umm Lulu and Sateh Al Razboot oil fields in the Persian Gulf.

Abu Dhabi split an existing offshore oil partnership into three blocks and is seeking new partners to hold as much as 40 percent of each of the the new concessions. The current contract governing those deposits as a single block expires on March 8 and has Total SA, BP Plc and Japan’s Inpex Corp. as partners.

Adnoc's New Deals

Abu Dhabi's state oil producer is working to award stakes in 3 blocks of fields

Source: Adnoc company statements

“Adnoc is sending a message that they’re going to be very broad and geographically diverse in looking for new partners,” said Jaafar Altaie, managing director of Abu Dhabi-based consultant Manaar Group. “Adding a partner like Cepsa, which has a large refining and petrochemicals focus, gives Adnoc the option of moving further into downstream businesses.”

Abu Dhabi holds about 6 percent of global crude reserves and produces most of the oil in the United Arab Emirates. While the U.A.E. is curbing output in an effort by two dozen nations to clear a global glut, the sheikhdom of Abu Dhabi plans to raise output capacity to 3.5 million barrels a day by the end of the year. Adnoc says it can pump about 3 million barrels daily with just under half of it coming from offshore deposits.

Adnoc is seeking to attract international partners that can contribute technology, financing or access to markets where oil demand is growing. Neither Cepsa nor the Indian companies that won a 10 percent stake at the Lower Zakum concession were partners in the emirate’s main producing fields.

Abu Dhabi Offshore

Investors in oil concession that expires next month

Source: Company information

“The agreement reflects Adnoc’s new partnership approach, as we expand and diversify our partner base,” Chief Executive Officer Sultan Al Jaber said in the statement.

Cepsa signed an agreement in November to work with Adnoc on a petrochemical plant and has an indirect holding in three smaller offshore deposits. India is the second-biggest buyer of U.A.E. crude behind Japan, according to Bloomberg tanker-tracking data.

Manaar’s Altaie estimated that Umm Lulu, the biggest field in the Cepsa concession, pumped about 93,000 barrels a day in December. The oil block where Cepsa will operate under a 40-year contract also contains the smaller Bin Nasher and Al Bateel fields, Adnoc said. Targeted production for the block is 215,000 barrels a day, Adnoc said earlier this month, without specifying a date.

Adnoc will retain a 60 percent stake in each of the three blocks for which it’s seeking partners. The company has said it was in talks with more than 10 potential partners for the fields. The company is completing agreements for all three concessions, it said Sunday, without saying when it would announce additional deals.

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