ADNOC to acquire stake in Azerbaijan’s Absheron gas field

The Abu Dhabi National Oil Co. (ADNOC) this week agreed a deal to buy into its first international upstream project through the acquisition of a 30% stake in Azerbaijan’s offshore Absheron gas field. Azerbaijan’s state oil company SOCAR and its French partner TotalEnergies will each sell a 15% share of the project to ADNOC in the deal, though no financials have yet been disclosed.

The state-owned Azerbaijan oil company, SOCAR, and its French partner, TotalEnergies, are divesting a 15% share each to ADNOC in this venture, although the financial details have yet to be disclosed.

In a statement ADNOC expressed its intentions, stating that this strategic investment in the Caspian region aims to secure a significant growth position as the company ventures into the international gas market. The partnership not only provides ADNOC with a major presence in a region blessed with abundant natural resources and immense growth potential but also opens doors to lucrative gas markets in Europe and Central Asia.

Absheron gas field’s estimated reserves stand at 300bn cubic metres, with the possibility of even greater volumes, according to Azerbaijan’s President Ilham Aliyev.

While ADNOC is channelling substantial funds into enhancing domestic oil and gas production capacity, the acquisition in Azerbaijan marks the company’s maiden step into foreign production. It has also – together with BP – expressed interest in purchasing a share in Israel’s Leviathan gas field, and it has made investments in European chemical and energy companies through another Abu Dhabi government firm, Mubadala Investments Co.

The Absheron gas and condensate field commenced production recently. Prior to this transaction, Total and SOCAR held equal 50% stakes in the project. Following the acquisition, the two companies will retain their partnership with each holding 35% shares.

Amidst its ambitious ventures, the UAE is currently hosting COP28, the UN climate conference, which focuses on funding efforts to reduce emissions and combat global warming. The country has faced criticism for promoting its clean energy initiatives while concurrently increasing crude production capacity by around 25%. Furthermore, the appointment of ADNOC’s CEO, Sultan Al Jaber, as the summit’s head has drawn attention.

Al Jaber has emphasised the need to gradually phase out unabated fossil fuel usage, referring to those without technology to capture carbon emissions. However, he also stressed that oil and gas will continue to be integral parts of the energy mix for years to come.

Acknowledging the inevitable transition away from hydrocarbons, the UAE is diligently working to diversify income sources beyond oil sales and to develop new industries. Nevertheless, specific timelines for when oil and gas usage will cease have not been disclosed by government officials.

In Azerbaijan, the UAE is already collaborating on solar energy projects with the state-run renewable energy producer Masdar, of which Al Jaber serves as chairman and former CEO.

Additionally, as part of the recent deal, ADNOC and SOCAR have expressed their intention to explore opportunities for joint upstream projects in Abu Dhabi, Azerbaijan and other potential locations. They are also keen to evaluate collaborations in renewable energy and other low-carbon ventures.