Historic shift as Abu Dhabi looks towards Asia for oil concession

Abu Dhabi, the gulf emirate, seems to be leaning towards Asian firms when it renews a decades-old major oil concession in a historic shift for the global energy market.

Western companies have dominated the Middle East oil industry for nearly a century but are facing increasing competition from energy-hungry Asia. Now Asia appears set to win its first major concession in the Middle East after the expiry of a World War II-era contract to exploit Abu Dhabi’s main onshore oil fields.

Experts believe it is inevitable that, after seeing huge boosts in oil exports to Asia, Middle East producers like the United Arab Emirates will seek to attract Asian companies as production partners as well.

The 75-year-old concession ran out in January and state-owned Abu Dhabi National Oil Company (ADNOC) is reviewing bids from nine international majors to award new long-term production-sharing agreements.

The ultimate decision will be taken by the Abu Dhabi Supreme Petroleum Council, the emirate’s highest decision-making body on energy issues.

The previous concession, granted in January 1939, was operated by Western companies ExxonMobil, Royal Dutch Shell, BP and Total, with 9.5 percent each, in addition to Partex Oil and Gas with two percent.

The Abu Dhabi Company for Onshore Oil Operations (ADCO), which currently operates production, had the remaining 60 percent.

The new concession will be for 40 years and the goal is to raise output from the current 1.5 million barrels per day to 1.8 million by 2017.

China National Petroleum Corporation (CNPC) is the top contender for the Abu Dhabi bid, with the Korean National Oil Corporation (KNOC) and Japan’s Inpex Corporation are among the nine companies bidding for the concession. The former partners; US giant ExxonMobil, Anglo-Dutch Shell, Britain’s BP and Total of France are also bidding, along with newcomers Statoil of Norway and Russia’s Rosneft.

The Middle East is the primary supplier of crude oil to Asian nations and Asia’s importance in the energy market has risen in recent years amid fundamental changes in production, exports and prices, he said.

Last year China replaced the United States as the world’s top crude oil importer, after US producers increased domestic output of oil and natural gas from conventional and shale sources.

China imports more than six million barrels per day, mostly from the Gulf, as opposed to about five million by the United States.

Chinese and Korean companies have already struck smaller concession deals in undeveloped areas of Abu Dhabi. China also signed a strategic deal to import 200,000 barrels per day from the UAE until 2020.

While demand from the United States and Europe is declining or stagnant at best, thirst for oil is increasing rapidly in Asia and emerging markets.

The UAE, OPEC’s fourth-largest supplier, is one of the last nations still giving major concession rights to international oil majors.