New moves in ADNOC’s Chinese, Indian tie-ups

10 July 2018, Week 27, Issue 682

A recent flurry of activity surrounding the multiplying Asian ties of state oil giant Abu Dhabi National Oil Co. (ADNOC) continued in late June.

The firm’s Al-Yasat Company for Petroleum Operations joint venture (JV) with Beijing-owned counterpart China National Petroleum Corp. (CNPC) confirmed a contract award on a major field development project while changing contracting strategy on a second.

Meanwhile, ADNOC’s burgeoning partnership with New Delhi – signalled by a landmark downstream deal earlier in the month – was highlighted by professions of intent for further co-operation in upstream and crude storage.

Al-Yasat is a 60:40 partnership between ADNOC and CNPC created in 2014 to operate two portions of undeveloped offshore and onshore acreage in the emirate. The Bu Haseer field, which lies around 155 km north-west of Abu Dhabi City, was the first to be developed in the offshore block, with the local National Petroleum Construction Co. (NPCC) awarded an engineering, procurement and construction (EPC) contract in 2014 to install an early production facility (EPF) with capacity of 8,000 bpd.

In late June, after a competitive tendering process involving major international contractors, the Abu Dhabi government-affiliated firm was confirmed as the winner of the EPC package covering the full-field development.

Estimated to be worth around US$450 million, the scope of works includes a new wellhead tower, tie-ins to the EPF, pipelines and cabling, and modifications to existing facilities at ADNOC’s Zirku and Das Island oil and gas-processing hubs. Completion is scheduled for 2020.

In the early years of Al-Yasat’s operations – which coincided with a prolonged oil market slump – an outline timetable of development plans called for the nearby Belbazem field in the same block to be brought on stream in around 2023.

The partners later altered their plans, calling for technical bids during the first quarter from a long list of prequalifiers for the front-end engineering and design (FEED) contract on an estimated US$1 billion project to develop the field to produce 45,000 bpd of oil and 27 mmcf (765,000 cubic metres) per day of gas.

However, in June, prospective contractors were informed of a second change of tack – as Al-Yasat asked for the resubmission of offers on a revised and scaled-back scope, covering pre-FEED work and assistance in the preparation of a second tender for a design competition integrating the FEED and EPC processes.

The bidders for the original package were understood to be France’s Doris Engineering and TechnipFMC, India’s Larsen & Toubro and the US’ McDermott.

The scheme’s provisional scope calls for the installation of several wellhead platforms, electrical submersible pumps at all production wells, and subsea pipelines and cabling linking the facilities to an existing processing plant at the Satah al-Razboot (SARB) field. SARB is operated jointly with the Umm al-Lulu field under a separate concession formed earlier this year by ADNOC with Spain-based Cepsa and Austria’s OMV.

Total anticipated oil-in-place at the offshore block – which also includes the undeveloped Umm al-Dholou and Umm al-Salsal fields – was put by Al-Yasat in the Bu Haseer contract announcement at around 1.5 billion barrels. The other block assigned to the operator covers a mixed onshore/offshore area in the south-west of the emirate – where commercial potential was said to remain under assessment.

ADNOC used the reorganisation of the emirate’s main offshore fields this year – and the protracted process completed last year of reconstituting the onshore concession with new foreign stakeholders – as a means to strengthen ties with key Asian consumers.

Chinese, Japanese and South Korean parastatals acquired portions of the new ADNOC Onshore concession while CNPC also took shares in two of the three offshore concessions. All three countries had some history of involvement in the emirate’s upstream sector. Japan Oil Development Co. was a shareholder in Abu Dhabi Marine Operating Co. (ADMA-OPCO), the previous operator of the now subdivided main offshore concession, and South Korea’s Korea National Oil Co and GE Energy partnered ADNOC in Al-Dhafra Petroleum, a venture similar to Al-Yasat operating three onshore and offshore areas.

However, the acquisition in February of a stake by the Indian state triumvirate of Indian Oil Corp. (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) of a stake in the Lower Zakum field’s concession marked the first upstream investment in Abu Dhabi by India.

Professions of intent to deepen ties were dramatically fulfilled on June 26 by ADNOC’s decision to invest in the US$44 billion refinery and petrochemicals complex in India’s Maharashtra state being developed by the same three Indian companies and ADNOC’s GCC counterpart Saudi Aramco.

In the aftermath of the landmark deal, New Delhi approved plans to create two new strategic petroleum storage facilities – in addition to the existing three, which have only recently been completed in the government’s belated move to create a strategic reserve. It also indicated that ADNOC would be invited to take part of the 18.3 million barrels of capacity due to be added at Padur, in Karnataka state.

The UAE company signed an agreement in January to store 5.86 million barrels at the Mangalore cavern, also in Karnataka – under an arrangement whereby storage is free of charge in exchange for a portion of the crude being considered part of India’s reserve.

Indian officials also evinced intent to participate in the maiden upstream licensing round launched by ADNOC in April. Al-Yasat’s acting CEO, Tayba Al Hashemi, revealed in May that strong interest had already been shown in the blocks by Chinese companies.

Edited by

Ian Simm


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