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ADNOC signs new offshore concession agreement with Austria’s OMV

Apr 29, 2018
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The Abu Dhabi National Oil Company (ADNOC) signed an agreement awarding OMV a 20 per cent stake in Abu Dhabi’s SARB and Umm Lulu offshore concession.

The signing was witnessed by His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, and Deputy Supreme Commander of the United Arab Emirates Armed Forces, and His Excellency Sebastian Kurz, Chancellor of Austria.

The agreement, which has a term of 40 years, effective from March 9, 2018, was signed by His Excellency Dr Sultan Ahmed Al Jaber, ADNOC Group Chief Executive Officer and Dr Rainer Seele, Chief Executive Officer of OMV.

The Satah Al Razboot (SARB) field is located in shallow waters, 120 km away from Abu Dhabi. First oil is expected before the end of 2018. The oil production at plateau rates is expected to be above 20 kbbl/d (net to OMV) and it is anticipated to be reached early in the next decade.

The Umm Lulu field is located offshore, about 30 km away from Abu Dhabi, in shallow waters. The early production started in the fourth quarter of 2016. The oil production plateau is also anticipated to be reached early in the next decade and it is expected to deliver 20 kbbl/d (net to OMV).

H.E. Dr Al Jaber said: “This long-term strategic agreement with OMV, as well as the other seven offshore concession agreements we have concluded recently, underscores ADNOC’s commitment to maximising value from Abu Dhabi’s substantial resources for the benefit of the nation, in line with the leadership’s directives.”

OMV, Austria’s largest listed industrial company, joins Spanish integrated oil and gas company CEPSA (20 perc ent), which is wholly owned by the Mubadala Investment Company, as a shareholder in the offshore concession. The SARB and Umm Lulu concession award to OMV strengthens ADNOC’s strategy to maximise returns from its resources, expand its downstream business, and retain value for the UAE.

OMV contributed a participation fee of US $1.5 billion (AED 5.5 billion) to enter the concession, which also takes account of previous investments made by ADNOC in the SARB field. ADNOC retains a majority 60 per cent stake in the offshore concession that will be operated by ADNOC Offshore, a subsidiary of ADNOC, on behalf of the concession partners.

The concession area comprises two producing fields, Umm Lulu, part of the former ADMA–OPCO offshore concession, and SARB. The ADMA-OPCO concession has been divided into three separate concessions in order to maximise commercial value, broaden ADNOC’s partner base, expand technical expertise, and enable greater market access.

 “The expansion of the global economy and increasing demand for oil, refined products and petrochemicals, provide us with new opportunities to create value across our upstream and downstream business. To seize these opportunities, we will work closely with OMV, and our other partners to further optimize operational efficiencies, enhance performance, and capture future growth opportunities. OMV’s strong track record in deploying advanced technologies to cost-effectively increase recovery rates from mature fields will help enable ADNOC to continue to be a reliable supplier of oil for decades to come,” added H.E. Dr Al Jaber

Today’s agreement completes the round of offshore concession awards, which has seen ADNOC bring on board with many more partners who bring value to the table, in terms of market access, capital, technology and expertise. Collectively the offshore agreements, concluded since the start of the year, have contributed US$ 7.92 billion (AED 29.1 billion) in participation fees and secured markets for 40 per cent of the UAE’s oil for the next 40 years. Over the life of the concessions many more millions of dirhams will be generated as oil production increases and new markets are secured.

Dr Seele said: “OMV is establishing a material position as an oil producer in the UAE and is delighted to further build on its existing partnership with ADNOC and Abu Dhabi. The offshore concession award is an important milestone in OMV’s delivery on its 2025 strategy, as we expand our footprint in one of the world’s leading oil and gas hubs. We are confident that our technological expertise will contribute to value creation and profitable growth, for all partners involved.”

OMV is already working with ADNOC on a number of other projects across the company’s value chain, including appraisal of the Shuweihat sour gas field. In May, 2017, ADNOC and OMV also agreed to work together to explore potential opportunities in support of ADNOC’s downstream businesses and the company’s 2030 smart growth strategy. The agreement provides for cooperation in a number of areas, including the evaluation of opportunities in downstream projects, the exchange of knowledge and experience in refining operations and refinery-petrochemical integration and optimisation, and downstream technical and maintenance support.

Johann Pleininger, OMV Board Member Upstream and Deputy Chairman of the Executive Board said: “This acquisition is a step towards our strategic goal to double our reserves. It will substantially increase OMV’s reserve base by approximately 450 million barrels, representing our share over the concession period. Our position in Abu Dhabi is balancing the Upstream production portfolio and increases our long-term cash generation.”

OMV’s share of the reserves, for the period of the concession agreement, would amount to approximately 450 mn barrels oil for the two main fields, with upside potentials from the satellite fields Bin Nasher and Al Bateel. OMV’s capital expenditures over the contract term are estimated to amount to approximately USD 2 bn, thereof approximately USD 150 mn will be spent per annum during the first five years.

OMV is an Austrian integrated oil and gas company part-owned by a subsidiary of Abu Dhabi’s Mubadala Investment Company.