UAE: energy: concessions, the year ahead
Published 16 April 2014
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2013 was a good year…
2013 was a good year for UK energy companies in the UAE. Shell was awarded in April the £6 billion Bab gas project, and in the same month, oil field services company Petrofac, in partnership with the Korean company Hyundai, won a contract to develop an offshore field. There were other high profile wins throughout the year: AMEC finalised a £90m project management consultancy contract and Rolls Royce was awarded a strategic £120m contract to supply five gas turbines to ADMA-OPCO. Finally, Atkins are also acting as the security subject matter experts to the Emirates Nuclear Energy Corporation (ENEC), providing technical and licensing advice to the plant owner, reviewing designs to ensure they meet local and international standards, and developing ENEC’s nuclear safeguards and export control processes.
… But where are we on the concessions?
A decision on the Abu Dhabi onshore oil concessions was expected at the end of 2013, as the original 75-year concessions were to expire on 11 January 2014. However ADNOC (Abu Dhabi National Oil Company) announced shortly after that date that it would take control of the fields until a full competitive process for the new concessions had been made. The process for renewing the concessions is intended to incentivise the IOCs to offer their most sophisticated technologies for the most complex wells. These will also be the largest contracts the Emirate will let this century.
Eleven companies were pre-qualified last year for the new concessions: BP, Shell, JODCO (Japan), KNOC (Korea), Statoil (Norway), CNOC (China), Occidental (US), Total (France), Exxon (US), Rosneft (Russia) and ENI (Italy).
The contenders submitted bids in October 2013. They were required to include a strong emphasis on skills transfer to enable Emiratis to replace expatriates over time and to help ramp up local production; for example, GASCO (a subdivision of ADNOC) will need around 8,000 more engineers over the coming eight years to deliver planned gas projects. The concessions are being divided into different fields, with the IOCs being invited to take a lead in one or more, bringing their specialist technology for the more challenging oil - but without having to share that technology across all ADNOCs businesses. It is likely that the companies eventually selected will share 40 per cent the total project, with ADNOC’s ADCO holding the residual 60 per cent.
ADNOC will make the technical and commercial recommendation. They are visiting and quizzing all the bidders in the first half of this year and likely to be in a position to make a recommendation by mid summer. The final decision will then be made by the Supreme Petroleum Council, chaired by the President of the UAE and ruler of Abu Dhabi Sheikh Khalifa With a number of iterations between ADNOC and the Supreme Petroleum Council likely in the second half of the year, a final decision may come in late 2014 or early 2015.
0.1 Other commercial opportunities for the year ahead
In terms of inward investment, the Abu Dhabi energy company TAQA remains a pillar of investment into the UK’s North Sea sector (it has invested over $4bn so far). It is the largest Emirati investor into the UK, specialising in maximising output from wells close to their expiry and of no further interest to the majors.
0.2 Disclaimer
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