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Shell Is ‘Very Interested’ in Renewing Abu Dhabi Oil Rights

By Anthony DiPaola – Oct 31, 2011 2:47 PM GMT

Royal Dutch Shell Plc (RDSA) is “very interested” in renewing its right to pump oil in a venture with Abu Dhabi’s state-run crude producer after its concession there expires in 2014, an executive with the Anglo-Dutch company said.

Shell wants to develop natural-gas resources in the sheikhdom to help meet rising domestic demand and to bolster its partnership there, John Barry, the company’s country chairman in the Persian Gulf emirate, said at a conference in Abu Dhabi.

International oil companies aim to develop oil and gas deposits to replace energy they consume by pumping at current fields. Shell, along with Exxon Mobil Corp. (XOM), Total SA (FP), and BP Plc (BP/), all partners in the Abu Dhabi concession, also signed agreements with Iraq to boost output there. Shell is exploring for gas in Saudi Arabia and will produce more of that fuel than it will pump oil next year, Barry said.

“Shell and the other IOCs will want to maintain their stake in Abu Dhabi,” said Robin Mills, head of consulting at Dubai-based energy advisory Manaar. “It’s a major part of their production and reserves. It’s also important to them as a test- bed for new technologies, and a way of maintaining a Middle East presence which they can use to win business elsewhere.”

Onshore Stake

A decision about renewing Shell’s holding is in the hands of Abu Dhabi National Oil Co., known as Adnoc, and the emirate’s Supreme Petroleum Council, which decides oil policy for the capital of the United Arab Emirates, Barry said.

Shell has a stake in Adnoc’s onshore unit, Abu Dhabi Co. for Onshore Oil Operations, until 2014. Adnoc owns 60 percent of the unit, with Shell, Exxon, Total, BP and Partex Oil & Gas holding the rest. Abu Dhabi holds more than 90 percent of the crude in the U.A.E., which in turn contains about 7 percent of the world’s proven oil reserves, according to BP data.

Partex, based in Portugal, is in discussions about renewing its stake in the partnership, said Antonio Costa Silva, chairman of the company’s management commission. The current arrangement has been a success, and “keeping that balance in mind is very wise,” he said in Abu Dhabi.

Exxon and Total said last year they wanted to continue in the partnership with Abu Dhabi and said they could use expertise in gas development and oil recovery to benefit the emirate. Exxon’s vice president of production in the Middle East and Russia, Mark Nolan, said Nov. 2 the company wanted a new partnership structure that allowed them to be operator of the fields in the Adco concessions and work directly with Adnoc.

More Flexible System

“The question, of course, is what form the concession will take post-2014, and what the financial arrangements may be,” Manaar’s consultant Mills said. “I suspect a more flexible system will emerge. The question is whether the terms will be economically attractive enough for the IOCs to make the most of the potential. I’m also curious to see whether any new companies enter.”

Partex may also partner with Abu Dhabi on solar and wind projects in the emirate, in Europe or elsewhere, Silva said.

Barry said Shell’s focus in Abu Dhabi until now has been on producing oil through the Adco venture, renewing its oil rights and maintaining its 15 percent stake in Abu Dhabi Gas Industries Ltd., known as Gasco, which is developing the sheikhdom’s onshore gas reserves. Adnoc owns 68 percent of Gasco, with Total and Partex owning the remainder.

Shell wants now to contribute technology to help Abu Dhabi find and develop gas to help resolve what Barry called a “crisis” in domestic gas supply.

“There’s the paradox that economic success gives rise to a gas shortage,” he said, noting Abu Dhabi’s needs for gas to generate power and supply industries. “We are looking at where we can work in Abu Dhabi and more widely in the U.A.E.”

To contact the reporter on this story: Anthony DiPaola in Dubai at [email protected].

To contact the editor responsible for this story: Stephen Voss on [email protected].


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