UAE: How a New Oil Deal Diversifies Emirati Energy Ties

3 MINS READMar 21, 2018 | 19:32 GMT
The Big Picture

Stratfor's 2018 Second-Quarter Forecast highlights that the members of the Organization of Petroleum Exporting Countries are urgently working to stabilize the global oil market. To achieve this goal and diversify its investments in oil, the United Arab Emirates is signing contracts designed to ensure the country has energy ties to Asia, as well as to the West.

The United Arab Emirates' state-owned oil company is continuing to sign a string of major oil deals. Abu Dhabi's National Oil Company (ADNOC) has signed yet another deal as it splits up one of its major offshore concessions. On March 21, ADNOC signed a deal with China National Petroleum Corporation (CNPC) granting the company a 10 percent stake in the Umm Shaif and Nasr concession and the Lower Zakum concession for the next 40 years in exchange for $1.175 billion. Through this and other deals, Abu Dhabi continues to shake up the landscape of its upstream energy sector as it strategically re-prioritizes long-term deals that are geared toward Asian oil companies.

As previously existing agreements for concessions in UAE oil fields expire, Abu Dhabi has signed a string of new ones allowing foreign oil companies to extract oil from its offshore fields. By diversifying its deals to include oil companies from more countries, the United Arab Emirates is attempting to ensure that the future of its lucrative energy resources is not entirely dependent on Western companies. During this process, both CNPC and India's Oil and Natural Gas Corporation (ONGC) have become increasingly important upstream partners for ADNOC in a sector that was previously dominated by Western companies such as Total SA, Exxon Mobil Corp. and BP. But that isn't to say such Western supermajors aren't still key players. On March 19, French company Total signed two 40-year concession agreements with ADNOC granting it a 20 percent stake in the Umm Shaif and Nasr concessions, as well as a five percent stake in the Lower Zakum concession, for a total of $1.45 billion.

The United Arab Emirates plans to retain a 60 percent stake in the concessions it is offering to international oil companies. And through the latest deal with CNPC, the country is one step closer to closing agreements on the other 40 percent, with further sales expected to be finalized on the last portions soon. The agreements with Total and CNPC join others already made with companies such as Italy's Eni, Japan's Inpex and Spain's Cepsa. Abu Dhabi still has a 20 percent stake to sell in one further concession field, and Austrian company OMV is the most likely candidate to be awarded the share. But regardless of which company ADNOC signs a concession agreement with next, Abu Dhabi has already achieved its goal to attain strategic commitments from India and China.

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