Bob Dudley, the chief executive of BP. Keystone, Laurent Gillieron / AP Photo
Bob Dudley, the chief executive of BP. Keystone, Laurent Gillieron / AP Photo

BP woos Abu Dhabi over oil deal renewal



The head of BP came to the capital yesterday as a deadline approaches for the British oil giant to renew its contract to pump oil in the emirate.

Abu Dhabi's biggest onshore concession expires in 2014 after a seven-decade run, and BP is jockeying to keep a stake in the business. Officials in the emirate will make a decision regarding its foreign oil partners "in the coming months", said the head of the Abu Dhabi National Oil Company (Adnoc), the state producer.

"Everything is being revisited," Abdulla Nasser Al Suwaidi, the Adnoc chief executive, said on the sidelines of a British trade mission to the UAE.

"The terms, what would be required also from the [international oil companies] … this is going be a new agreement."

BP holds a 9.5 per cent stake in the Abu Dhabi Company for Onshore Oil Operations (Adco), as the concession is called.

One of the oldest partnerships in the region, it dates from 1939 and includes the Anglo-Dutch Shell, France's Total and the American ExxonMobil as well as Portugal's Partex.

"Abu Dhabi and the emirates have been important to BP for 70 years," said Bob Dudley, the UK company's chief executive. "And we'd want to continue to cooperate with people, technology."

Maintaining a stake in Abu Dhabi is particularly important for BP. The company is still dealing with the legal and regulatory fallout from last year's Gulf of Mexico oil well blowout and is keen to reassure investors after losing a US$16 billion (Dh58.76bn) deal to drill in the Russian arctic to its larger rival ExxonMobil.

Peter Hutton, an analyst at RBC Capital Markets, said BP would regard the renewal of its Abu Dhabi contract as an important affirmation of "business as usual" as well as a guarantee of a revenue stream, even if the margins were tight.

Abu Dhabi has yet to make clear whether it will stick with BP and the other old partners or invite new players, such as South Korea, China or companies such as OMV or Statoil that have indicated their interest. Adco is the largest single concession in Abu Dhabi, with a capacity to produce 1.4 million barrels per day (bpd), half the emirate's output.

Abu Dhabi is relying on its foreign partners to help it increase nationwide capacity from 2.8 million bpd to 3.5 million bpd. But those companies are reluctant to invest in fields where they risk losing everything after current contracts end in 2014.

Industry executives are lobbying Abu Dhabi to increase the amount it pays the partners - currently $1 a barrel - and allow them to take sole control of a field rather than having to cooperate with other investors. This would enable them to deploy proprietary technology without the fear of exposing it to a competitor.

In June the Government reshuffled the ranks of leadership in its oil industry - promoting Mr Al Suwaidi to chief executive of Adnoc - a move interpreted by investors as a sign the Government was starting to address the issue.

Mr Dudley's visit also revived speculation from last year that Abu Dhabi could help prop up the company by buying shares.

"We've been looking at ways of cooperating with companies from Abu Dhabi and different places around the world, but I wouldn't say we're in specific discussions about a particular project," said Mr Dudley.

"Of course we always welcome investors in BP."

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