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China's CNPC Buys Stake in $22 Billion Abu Dhabi Oil Venture

China National Petroleum Corp. bought a stake in Abu Dhabi’s largest oil concession as the Middle Eastern emirate with 6 percent of global crude reserves looks increasingly to Asia, its biggest market, for investment to raise output capacity.

Abu Dhabi National Oil Co. awarded CNPC an 8 percent stake in the onshore venture in return for a $1.8 billion signing bonus, Adnoc said Sunday in a statement. State-run CNPC is the venture’s third Asian partner, joining Japanese and South Korean companies alongside BP Plc and Total SA. BP signed on to the project in December, and Total in January 2015.

Asia will show the fastest growth in energy demand over the next two decades, according to the International Energy Agency. Abu Dhabi is among Persian Gulf oil producers including Saudi Arabia and Iraq that are tapping Asia for energy investments. While European and U.S. companies have pumped oil in the Middle East for more than a century, their Asian counterparts are relative newcomers.

“If you’re Abu Dhabi and looking for demand growth, China is the future and its demand is going to continue to grow,” Chris Gunson, a Dubai-based lawyer at Amereller Legal Consultants, said Sunday. “For the big buyers in Asia, the logical source of that future supply is the Gulf.”

CNPC is joining the Abu Dhabi Company for Onshore Petroleum Operations, or ADCO. BP and Total each hold 10 percent stakes in the venture, while Japan’s Inpex Corp. owns 5 percent and GS Energy Corp. of South Korea holds 3 percent. Abu Dhabi plans to retain a 60 percent stake in ADCO and is seeking an investor for the remaining 4 percent, Adnoc said in the statement.

 

Export Pipeline

Japanese companies are partners in at least four other oil-production ventures in Abu Dhabi, the largest sheikhdom in the United Arab Emirates. Korean and Chinese companies are exploring at smaller concessions in the emirate. CNPC’s engineering arm also helped build an export pipeline in Abu Dhabi. 

Elsewhere in the region, CNPC is developing Iraq’s biggest oil field, together with BP. China Petroleum and Chemical Corp. is a partner in a refinery in Saudi Arabia, and Chinese firms are developing crude deposits in Iran.

Abu Dhabi is seeking to boost production capacity to 3.5 million barrels a day by 2018. ADCO pumps about half of Abu Dhabi’s roughly 3 million barrels of daily crude output.

The emirate is expanding production capacity even amid a global oil glut that cut prices to an average of about $50 a barrel over the last two years. The Organization of Petroleum Exporting Countries, of which the U.A.E. is the fourth-biggest producer, agreed in November to cut production in effort to trim crude stockpiles and boost prices.

The 40-year concession replaces an earlier agreement under which Western oil majors pumped the emirate’s crude. Exxon Mobil Corp. and Royal Dutch Shell Plc took part in the previous venture, also called ADCO, along with BP, Total and Portugal’s Partex Oil & Gas Group. That deal expired in January 2014. Adnoc ran the concession on its own for a year, then backdated the new deal to Jan. 1, 2015.

 

SOURCE: www.bloomberg.com  |  LAST UPDATED: 20-February-2017 at 4:51 AM UTC

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