ABP Blacklists PetroChina Due to Adnoc and CNPC Sign Upstream Agreement

Abu Dhabi National Oil Company (Adnoc) and China National Petroleum Corporation (CNPC) have signed a strategic agreement to collaborate in upstream projects in undeveloped areas, Wam has reported.

The areas will be identified by the Supreme Petroleum Council (SPC), the UAE’s highest authority on energy policy.

According to the agreement, CNPC will conduct technical and economic studies in order to assess those (undeveloped) areas and will forward the studies to Adnoc.

The agreement also aims at cooperating in areas of petrochemical development, technical services, engineering and construction services.

The co-operation agreement is the first such opening for Chinese players in the emirate.

The two companies last year signed a 20-year crude supply agreement, which comes into effect from 2014, with China’s Sinopec also mooted for infrastructure development in Fujairah.

The state-level agreement follows a memorandum of understanding with South Korea’s KNOC last year, which would allow access to a 1-billion-barrel concession and to three undeveloped areas.

Less specific access agreements have also been inked with Japan tied into loans to Adnoc. The number of companies trying for tie-ups with Adnoc in the last couple of years has been significant, with Asian players dominating as the renewal date for Abu Dhabi’s key upstream concessions approaches.

Not to be left behind, midsize US and larger European players have also been active in setting up offices and holding talks with decision-makers, albeit often lacking the state-level support that Asian NOCs bring to the table.

The report that the onshore Abu Dhabi Company for Onshore Operations (Adco) concession will be put to tender, possibly in packages when it elapses in 2014, will only further incentivise that interest, with the country’s second major concession offshore also approaching its expiry in 2018.

Breaking up the concession into segments would have advantages for the UAE in potentially speeding up the pace of development and also in accessing a variety of technologies beyond those available from the supermajors.

It does put into question current expansion programmes and work, with a target of 3.5 million barrels per day (mbpd) in place for 2017 (from 2.5 to 2.6 mbpd today), largely made up of increments at the two concessions reaching expiry.

In addition, the UAE will be seeking to minimise its costs as far as possible, despite criticism of the current low take from current contracts, potentially making this a counterpart to Iraqi offerings, albeit with the regulatory and political stability that the latter lacks.

(Oilangasnewsworldwide, Edited by Topco)