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China secures Abu Dhabi oil field

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China National Petroleum Corporation (CNPC) has secured the rights to produce and export oil from Abu Dhabi, helping China secure more fuel for its rapid economic growth.

State-run CNPC has expanded over the past decade to over 30 countries around the globe to help secure supplies of the oil and gas that China needs to sustain its economic growth.

Under the latest deal granted by the president of the United Arab Emirates (UAE), China’s biggest energy company will help develop several onshore and offshore fields in Abu Dhabi and take a share of any oil produced, UAE state news agency WAM said.

“It’s a typical concession, meaning you pay the royalty and then you get the JV (joint venture) share of production,” a senior source at CNPC told Reuters.

The UAE concession system allows oil companies to acquire equity in hydrocarbon resources, with state-run Abu Dhabi National Oil Company (ADNOC) holding a 60 percent stake in each joint venture and foreign partners usually sharing the other 40 percent.

Under the new joint venture, called the Al Yasat Company for Petroleum Operations, the Chinese energy giant will be the sole foreign partner with 40 percent, and ADNOC will hold the 60 percent controlling stake.

The new concession comes after ADNOC and CNPC signed a strategic partnership in January 2012 to work on upstream projects in the UAE.

The joint venture will drill for crude and build the processing and transport infrastructure needed to export it, WAM reported, without giving details on the fields covered by the new concession.

Western oil and gas giants Exxon Mobil, Royal Dutch Shell, Total and BP have been the dominant foreign players in the UAE concession system for decades.

But in the 50 years since they made the first commercial UAE oil discoveries, western oil use has waned, while demand in Asia has soared.

Asian energy companies are keen to take stakes in fields that mostly supply the Asian market, and some in Abu Dhabi say the Gulf OPEC member should allow more Asian companies to help run its fields.

When the concession for Abu Dhabi’s biggest onshore fields expired early this year, Abu Dhabi was unable to agree whether to stick with the four western oil giants that had been running them.

ADNOC has been forced to take full control of the Abu Dhabi Company for Onshore Oil Operations (ADCO) while authorities weigh decide whether to extending the deal with western companies or welcome in new Asian oil companies.

The CNPC agreement has no direct impact on any of the decades-old concessions. But it is another sign that the government is seeking to cement political and commercial ties with its biggest customers in Asia.

“It really shows that Abu Dhabi is clearly pivoting towards Asia,” Valerie Marcel, associate fellow of energy at the Royal Institute of International Affairs in London, said.

“It doesn’t mean that the old partners won’t get anything, but it does point once more to the fact that their gaze is turned eastwards.”

4 Comments on "China secures Abu Dhabi oil field"

  1. rockman on Tue, 29th Apr 2014 9:37 am 

    Can’t find this detail (and doubt we’ll ever see it) but while the Chinese et al will only own 40% of the production they may the “call” or right of first refusal on 100% of the production. It would require them to pay the going market price but this would allow 100% of the production to be shipped where they wanted: China or another country depending on where the Chinese gov’t saw the best benefit. This is often the trade allowed the promoted partner in such deals. The host country benefits from the outside capex and the company gets to control the export destination.

  2. GregT on Tue, 29th Apr 2014 11:12 am 

    I remember conversations around the water cooler, 25 years ago, about the consequences of outsourcing industry, jobs, and giving technology, to Asia. What is occurring today comes as no surprise. Capitalism doesn’t work forever, for the vast majority of people.

  3. baptised on Tue, 29th Apr 2014 12:28 pm 

    Give and take of negotiations with lot’s of patience, prevails over FORCE every time. This is a sidebar but I watched War Inc. last night one of the best movies I have seen in a long time, lot’s of LOL. It’s funny because it’s true.

  4. Makati1 on Wed, 30th Apr 2014 10:18 am 

    The Chinese have billions of USD to spend every month so they can take deals in less secure areas, Even if some don’t pan out, it is better than holding Charmin dollars.

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