India secured a share in Abu Dhabi’s oil production for the first time after agreeing to pay $600 million for a tenth of one of the emirate’s biggest offshore deposits.
State-owned Oil and Natural Gas Corp. and other Indian companies agreed to a 40-year contract for rights to pump crude from the Lower Zakum field in partnership with Abu Dhabi National Oil Co, according to an Adnoc statement.
Adnoc signed the deal during a visit of Indian Prime Minister Narendra Modi to the capital of the UAE on Saturday.
Abu Dhabi, which holds most of the U.A.E.’s oil reserves, is looking for new partners at its offshore fields as the production concession for some deposits expires next month. Partners in Abu Dhabi’s fields generally receive an amount of crude oil commensurate with their stakes in return for tax and royalty payments and investment to boost output.
The Indian companies will pay 2.2. billion dirhams ($600 million) to Abu Dhabi for their stake in the field, according to the statement, putting the overall value of the deposit at $6 billion. Adnoc, which retains 60 percent holdings in its fields, aims to award rights for another 30 percent of the Lower Zakum field as well as to two other offshore crude blocks.
The Indian consortium is made up of ONGC’s wholly owned subsidiary ONGC Videsh, the Indian Oil, and Bharat PetroResources, which is a 100 percent subsidiary of Bharat Petroleum, according to the Adnoc statement.
The concession will be operated by Adnoc Offshore, a subsidiary of Adnoc, on behalf of all concession partners, it said.
Expanded production from its offshore reservoirs are part of Adnoc’s plans to raise its onshore and offshore production capacity to 3.5 million barrels a day by the end of 2018, according to the statement. Adnoc offshore fields currently produce about 1.4 million barrels a day, it said.
The current production of the Lower Zakum field is about 400,000 barrels a day and the plan is to increase the plateau target to 450,000 barrels a day by 2025, according to a statement from ONGC Videsh.
The Indian win gives the country, one of the biggest buyers of UAE crude, a direct stake in Middle East barrels.
Adnoc will be able to tap demand in the world’s second-most populous nation and expands its portfolio of partners. Adnoc has said it received more than 10 bids from companies seeking to work on the fields.
India is the second-biggest buyer of UAE crude behind Japan, according Bloomberg tanker tracking.
Adnoc is seeking partners for its biggest fields that will help secure market access for its crude in some of the top energy consumers. Adnoc last year signed deals with Chinese and Korean companies to partner in its main onshore fields for the first time.
The company is also seeking partnerships in refining and petrochemicals and may seek to buy assets abroad to secure market share.
Adnoc also signed on Saturday an agreement with the Indian Strategic Petroleum Reserves Ltd for a strategic crude oil storage facility in the southern Indian city of Mangalore, according to the Adnoc statement.
The agreement covers the storage of 5.86 million barrels of Adnoc crude oil in underground facilities, at the Karnataka facility.
“The oil storage facility will help ensure India’s energy security, as well as enable Adnoc to efficiently and competitively meet market demand in India and across the fast developing south east Asian economies,” it said.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.
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