IOCs long-term investment plans won’t be affected by short-term oil price movements


Oil concession talks between Abu Dhabi and the world’s largest international energy companies over the renewal of oil field production contracts won’t be affected by the steep decline in crude prices to levels below $50 a barrel over the past six months, the UAE’s top energy official said.

Abu Dhabi’s Supreme Petroleum Council, the Gulf State’s top oil sector decision maker, is presently evaluating bids from Western and Asian majors seeking to gain access to the onshore concession of Abu Dhabi Company for Onshore Oil Operations, which expired in early 2014.

Companies “are bidding on a long-term relationship that’s going to last 30 years or more; they are having a view on that as a long-term investment. They’re not going to change their mind every time we have a glut in the market,” HE Suhail Al Mazrouei, the UAE Minister of Energy, said in an interview with

“Those who are bidding on Adco are all mature oil and gas companies, and they understand what they’re bidding on, they understand the value. I don’t think it [the low oil price] is going to impact it directly in any shape or form because this is not just a one or two-year arrangement, but a long-term arrangement,” the UAE energy minister said.

Before the expiry of its concession, Adco operated a joint venture between state-run Abu Dhabi National Oil Co. (Adnoc), holding a 60-per cent stake on the one hand, and ExxonMobil, Royal Dutch Shell, BP and Total, each with a 9.5-percent share, and Partex Oil & Gas, with 2 percent, on the other. Adco’s concession covers a collection of onshore fields in Abu Dhabi emirate that together account for around 40 percent of the country’s 2.8 million barrels a day oil production. Adnoc is also set to announce plans in the near future for its offshore concessions that expire in 2018.

In interview conducted in front former Prime Minister of Lebanon Fuad Siniora and 300 energy industry officials representing many countries and companies bidding for the oil contracts, the UAE’s energy minister admitted that concluding new concession arrangements at a time of low prices may prove difficult for some other countries entering the industry for the first time, but not the UAE.

“From country to country it depends on the fiscal regime, the stability of the fiscal regime, and the nature of the contract – this is all going to be judged by those who are bidding versus the current oil prices. If someone is aspiring to put [in place] very tough terms at these prices I don’t think he’s going to be successful,” HE Al Mazrouei said.  The minister added that the UAE’s long track record as reliable industry partner was a key differentiator versus other countries seeking to award concessions in the present low oil price environment.

Last year, Mexico’s government decided to open up its oil and gas sector to foreign operators in a bid to attract much-needed investment, expertise and technology, with the first set of tenders for new concessions and contracts expected to be issued this year. Iran too may offer new oil contracts to IOCs should sanctions on the country be lifted later this year.

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