Abu Dhabi National Oil Company forms joint venture with China National Petroleum Corporation
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 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."For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.