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Britain’s ties with Abu Dhabi threatened by oil deal deadlock

Screen Shot 2014-10-28 at 11.51.59From an article by Andrew Critchlow published by The Telegraph on 13 Feb 2015 under the headline:

“Britain’s ties with Abu Dhabi threatened by oil deal deadlock”

Danger of Shell and BP walking away from historic oil agreement which has underpinned Britain’s broader historic relationship with the United Arab Emirates


BP and Royal Dutch Shell are in danger of making a strategic error should they decide to walk away from a historic oil deal with Abu Dhabi, which has provided the commercial foundations for Britain’s broader relationship with the sheikhdom.

Negotiations have dragged on for more than a year and now appear to have reached an impasse over the emirate’s demands for upfront payments. The money amounts to about $7bn (£4.5bn) for rights to operate some of the world’s biggest onshore oilfields including Bu Hasa, Bab and Asab. At stake is rare upstream access to the deserts of Abu Dhabi, which hold close to 6pc of the world’s proven oil reserves, and Britain’s overall political and business influence in one of the region’s most potent sheikhdoms.

To complicate the already fraught talks, the outlook for oil prices remains at best volatile over the short term and potentially bleak further ahead. Although the price of a barrel of Brent crude rallied back above $60 per barrel this week, oil majors such as Shell and BP remain profoundly sceptical that this represents the early shoots of any kind of spring recovery.

As both companies strive to trim billions of pounds from their capital expenditure budgets over the next three years, paying a large fee upfront for a deal that could earn them as little as $2.85 for every barrel of crude that they will produce from the Abu Dhabi fields has understandably caused some consternation.

The danger is that by pushing too hard a bargain both BP and Shell could damage the relationship that Britain has nurtured over decades with Abu Dhabi’s powerful Al-Nahyan royal family. Worse still they could potentially be frozen out of future oil deals in the emirate.

While Shell and BP appear to be playing a game of cat and mouse with Abu Dhabi over renewing the concession, French oil giant Total surprised the market by announcing that a deal to renew its own contract had been reached.

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