By Aman Shah
The oil giants of China, Japan, Britain, France and India have been competing against each other for a stake in one of the largest oil fields of the world. Recently, India became successful in closing this deal when Indian PM Narendra Modi was on his second state visit as PM to the United Arab Emirates. According to the deal, the Indian Consortium of Companies will have a 10% stake in the large offshore oilfield against 2.2 billion dirhams (600 million USD) to Abu Dhabi National Oil Company (ADNOC—the state-owned oil company of UAE, just like ONGC). The agreement is effective for the period of 40 years effective from March 9, 2018.
This consortium of companies includes Oil & Natural Gas Corporation Videsh (the Foreign Investment arm of ONGC India), Indian Oil Corporation and Bharat Petro Resources Ltd (wholly owned subsidiary company of Bharat Petroleum). ONGC is the major stakeholder of the consortium. This deal was part of the state visit of PM and his meeting with the Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed al-Nahyan.
What is this oil field of ADNOC?
According to a survey by Oil & Gas Journal, as of 2015, the UAE holds the seventh-largest reserves of oil in the world, amounting to 97.8 billion barrels. Most of the reserves are located near Abu Dhabi. The Lower Zakum Oil Field is one such oil field 84 kilometres North-West of Abu Dhabi Islands. These Zakum Fields have oil reserves amounting 17.2 billion barrels of oil (about 18% of UAE’s reserves),
ADNOC—the UAE counterpart of ONGC, owns oil fields in the Lower Zakum area. They have concession areas, namely Lower Zakum, Umm Shaif and Nasr and Sateh Al Razboot and Umm Lulu. Restructuring of these areas was aimed at expanding ADNOC’s partner base, creating a greater market value and expanding its technical expertise.
The existing ADMA-OPCO concession produces around 700,000 barrels of oil per day (bpd) and is projected to have a capacity of about 1.0 million bpd by 2021. Existing shareholders in ADMA-OPCO are ADNOC with 60%, British Petroleum (BP) with 14.67 percent, Total SA (French multinational) with 13.33% and Japan Oil Development Co with 12%.
Effect on the relations between UAE and India
This is the first time an Indian company will take part in the Abu Dhabi oil and gas concession. This deal is expected to help India meet its growing demand for energy and refined products. India is the third-largest consumer of oil in the world, behind only US and China, with 4.16 million bbl of oil consumption.
India’s entry into this upstream sector may highlight the developing relations between the Gulf states and India. India historically had close trade relations with the Gulf states. It is, in fact, the second-biggest buyer of its crude, behind Japan, according to Bloomberg tanker track. This is an attractive and strategic association that will deliver competitive returns and long-term growth opportunities for both the countries. However, the effect of this association on Indian oil prices is yet to be experienced.
Featured Image Source: Visual Hunt
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