(MENAFN- Gulf Times) Inpex Corp of Japan joined Total in developing the main onshore oil deposits in the UAE as Abu Dhabi calls on new partners for its $22bn effort to pump crude from its largest fields.
Japan's state-backed energy explorer will take a 5% stake in the fields, Yoichi Miyazawa, the trade minister, said at a press conference in Tokyo yesterday. The concession will give Japan access to crude from the Abu Dhabi deposits for 40 years starting January 1, 2015, Inpex and the emirate's government-owned oil producer said in an e-mailed statement.
"It makes sense for Abu Dhabi to name an Asian partner since more of their demand is coming from there," said Robin Mills, a Dubai-based analyst at Manaar Energy Consulting. "Inpex brings quite a lot technically and they operate major projects."
A Chinese company could be one of the next bidders awarded a stake, he said.
Abu Dhabi National Oil Co known as Adnoc picked Inpex from at least 10 bidders to join it and Total in the venture. Inpex agreed to pay Adnoc a signing bonus of about $1.1bn, Japan's public broadcaster NHK reported yesterday, without saying where it got the information.
The project "is highly significant in terms of the company's growth strategies, and also largely contributes to the long-term, stable supply of energy to Japan," Toshiaki Kitamura, Inpex chief executive officer, said in the statement.
Abu Dhabi, the UAE's largest emirate, holds about 6% of global oil reserves. The UAE capital plans to boost crude production capacity to 3.5mn bpd in 2017, from about 3mn barrels a day now. Output capacity from the onshore bloc in which Total and Inpex are partners will rise to 1.8mn bpd by then, from about 1.6mn barrels now, Adnoc and Inpex said.
Adnoc is spending about $22bn on projects to increase onshore oil and gas production and export capacity, Omar Suwaina al-Suwaidi, the company's deputy director for strategy, said at a conference in Abu Dhabi on November 11. The concession encompasses the fields of Bab, Bu Hasa, Sahil, Asab, Qusahwira, Mender, Al Dabb'iya, Rumaitha and Shanayel, Adnoc said yesterday.
Total, along with BP, Exxon Mobil Corp, Royal Dutch Shell and Partex Oil & Gas, was a shareholder in the Abu Dhabi onshore fields, under a 75-year concession agreement that expired in January 2014. Total became the first company awarded a stake in January, getting 10% of the holding.
Inpex wasn't involved in the onshore projects until now.
Adnoc, which plans to retain 60% of the partnership, asked the remaining bidders to match the $2.2bn signing bonus Total agreed to pay for its 10% share in the fields, two people with knowledge of the situation said February 12.
Adnoc was last week in advanced talks with two Asian bidders, while proposals "by international oil companies failed to fulfil Adnoc's requirements and conditions," director general Abdullah Nasser al-Suwaidi said, according to an April 20 statement from the company. China National Petroleum Corp was among companies to bid for the concession, according to Energy Intelligence Group. Three calls to CNPC's Beijing-based spokesman Qu Guangxue weren't returned.
"China's where the action is in terms of demand growth," Mills said. China could win a stake in the concession if Adnoc wants a partner from the country with the prospect for the greatest future demand and if Adnoc deems the technical aspects of CNPC's bid strong enough, Mills said.
Adnoc is seeking to boost the amount of oil it can extract from its fields to 75% of reserves, double the 35% of crude countries have historically been able to recover, Michael Townshend, regional president of BP Middle East, said last week. That requires "near perfection" in reservoir management, he said.
Murban grade crude pumped from Adnoc's onshore fields can be exported from the Jebel Dhanna port in the Gulf and from Fujairah, the UAE oil trading hub that sits beyond the shipping chokepoint at the Strait of Hormuz. The Strait, separating the Gulf from the Indian Ocean, is the world's most important transit bottleneck for oil shipments, according to the Energy Information Administration.
"This deal will contribute to Japan's stable supply as exports from the block will bypass the Strait of Hormuz," Miyazawa said at the trade ministry press conference.
The agreement will provide Inpex about 90,000 barrels of oil a day, which is equal to the company's equity stake in production from the concession, Ryo Minami, head of the ministry's oil and gas department, said at the press conference.
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