China wins big with stakes in US$22b Abu Dhabi oil deal

[DUBAI] Chinese companies are big winners in the competition among foreign bidders for stakes in Abu Dhabi's largest oil concession, snatching a combined 12 per cent of the venture as the Middle Eastern emirate looks increasingly to Asia, its biggest market, for investment.

Abu Dhabi National Oil Co awarded a 4 per cent stake in the onshore venture - the last share of the project that was still up for grabs - to Shanghai-based CEFC China Energy, Adnoc said in an e-mailed statement. CEFC is paying an US$888 million signing bonus, Adnoc said on Monday. The announcement came one day after China National Petroleum Corp agreed to buy 8 per cent of the same concession for US$1.8 billion.

The dual awards mark China's debut as a major shareholder in the biggest oilfield operator in the United Arab Emirates, Opec's fourth-largest member. Together, the stakes held by state-run CNPC and energy investor CEFC exceed the 10 per cent shares that both BP Plc and Total SA own. BP signed on to the project in December, and Total in January 2015.

Asia will show the fastest growth in energy demand over the next two decades, according to the International Energy Agency.

Abu Dhabi is among Persian Gulf oil producers including Saudi Arabia and Iraq that are tapping Asia for energy investments. While European and US companies have pumped oil in the Middle East for more than a century, their Asian counterparts are relative newcomers. Japanese and Korean companies are also investors with Adnoc in the deposits.

"You can see the attraction for Abu Dhabi and for China on both sides of this deal," Richard Mallinson, an analyst with Energy Aspects in London, said Monday by phone. "In China, Abu Dhabi sees a huge and growing importer. China's gone to great lengths to establish supply footholds, so there's a real benefit in tapping large and stable reserves."

Export Pipeline CNPC and CEFC are joining the Abu Dhabi Co for Onshore Petroleum Operations, or ADCO. Japan's Inpex Corp owns 5 per cent of the venture, while GS Energy Corp of South Korea holds 3 per cent. No companies from Asia were involved in the previous concession for the onshore fields. Abu Dhabi plans to retain a 60 per cent stake in ADCO.

Japanese companies are partners in at least four other oil-production ventures in Abu Dhabi, the largest sheikhdom in the United Arab Emirates. Korean and Chinese companies are exploring at smaller concessions in the emirate. CNPC's engineering arm also helped build an export pipeline in Abu Dhabi.

Elsewhere in the region, CNPC is developing Iraq's biggest oil field, together with BP. China Petroleum and Chemical Corp is a partner in a refinery in Saudi Arabia, and Chinese firms are developing crude deposits in Iran.

With the two deals announced this week, Chinese buyers secure more supplies of Abu Dhabi's main Murban crude grade. CNPC agreed in 2011 to increase purchases of crude from the emirate under long-term contracts.

Abu Dhabi, with 6 per cent of global crude reserves, is seeking to boost production capacity to 3.5 million barrels a day by 2018. ADCO pumps about half of Abu Dhabi's roughly 3 million barrels of daily crude output.

The emirate is expanding capacity amid a global oil glut that cut prices to an average of about US$50 a barrel over the last two years. The Organization of Petroleum Exporting Countries agreed in November to cut production to trim crude stockpiles and boost prices. Brent crude has gained about 11 per cent since the day Opec announced that agreement and was up 0.8 per cent at US$56.23 a barrel at 1.22pm in London.

The 40-year ADCO concession replaces an earlier agreement. Exxon Mobil Corp. and Royal Dutch Shell Plc took part in the previous venture, also called ADCO, along with BP, Total and Portugal's Partex Oil & Gas Group.

BLOOMBERG