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UPDATE 2-UAE takes charge of big oilfields for now as western majors' deals expire

Wed, 08th Jan 2014 19:58

* Foreign oil company staff to keep working as serviceproviders

* Disagreement over which companies best suited delaysrenewal

* Western oil majors' knowledge of fields may see themreturn

By Daniel Fineren and Stanley Carvalho

DUBAI/ABU DHABI, Jan 8 (Reuters) - Abu Dhabi will take fullcontrol of the UAE' biggest oilfields when its decades-oldventure with four western oil giants ends this weekend, while itweighs new partnerships that could include its long-termcollaborators or Asian newcomers.

The OPEC member country has held a 60-percent stake in AbuDhabi Company for Onshore Oil Operations (ADCO) since acquiringan interest in fields that produce over half the United ArabEmirates' oil.

Four of the world's largest stock-listed energy companies -ExxonMobil, Royal Dutch Shell, Total and BP - have each held 9.5 percent equity stakes in theADCO concession since the 1970s and would be keen to prolongtheir involvement.

After their current deal expires on Jan. 11, Abu DhabiNational Oil Company (ADNOC) will take 100 percent of the ADCOconcession in what is seen as a temporary measure whilepolitical leaders in the UAE capital decide whether to let bigAsian oil buyers in for the long-haul.

"All of the shareholdings of the foreign partners will goback to ADNOC," a spokesman for ADNOC said on Wednesday after aceremony to mark the end of the 75-year existing partnership.

He declined to comment on when the government of Abu Dhabimight be ready to award the next long-term deals to run them.

The concession expiry means the western partners will not bepaid in oil until the new partners are decided, but thecompanies will continue to work on the fields as serviceproviders in the interim, an industry source said.

"The majors cannot be replaced from one day to the next,this does not end their working relationship," the source said.

The western oil companies are among the hopefuls vying tokeep running the fields for decades to come and their technicalexperience in operating the fields is seen by many in theindustry as vital to squeezing the most out of them.

Last year's award of a $10 billion gas project that will seeShell tackle highly toxic gas at a field within the ADCOconcession strengthens its bid to continue operating theoilfields.

But in the half century that has passed since they made thefirst commercial oil discovery in 1960, western oil demand hasstarted to wane, while consumption in Asia has soared, spurringAsian companies to seek security in stakes in oil and gas fieldsaround the world.

ABU DHABI SPLIT

ADNOC director-general, Abdulla Nasser Al Suwaidi, said backin November 2012 that ADNOC would recommend that the SupremePetroleum Council of Abu Dhabi (SPC) maintain the currentpartners.

The SPC in the past has typically gone along with ADNOC'srecommendations.

But the dilemma now dividing the SPC, some industryobservers say, is whether to stick with the U.S. and Europeancompanies or make room for some Asian newcomers. These wouldoffer a chance to strengthen political ties with the UAE'sbiggest oil buyers such as China, Korea and Japan.

Until the Council can agree ADNOC will have full control.

"There is no one consolidated view of how the future AbuDhabi upstream oil and gas sector should look," said ChristopherGunson, a Dubai-based lawyer at the law firm Pillsbury.

He said some in Abu Dhabi would like to see ADNOC run theconcession alone in the long term, while other Abu Dhabi oilofficials see more benefits to maintaining the status quo.

Abu Dhabi signed the 75-year agreements with western oilcompanies in January 1939. The government acquired a 60-percentshare in the early 1970s and the Abu Dhabi Company for OnshoreOil Operations was formed in 1978.

Collectively the ADCO fields produce around 1.5 millionbarrels a day (bpd), compared with total UAE production ofaround 2.75 million bpd, with most of the output coming fromfive fields: Asab, Bab, Bu Hasa, Sahil and Shah.

ExxonMobil, Shell, Total and BP currently receive equityshare of Murban crude from the fields.

ADNOC plans to sell these volumes through one-year termcontracts with the oil majors while the OPEC producer decideswhich companies will become its equity partners.

Some big oil companies, notably ExxonMobil, haveexpressed concern about operating side by side with rivals in anADNOC-controlled concession, with all partners expected to sharetheir technology.

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