His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, and Deputy Supreme Commander of the United Arab Emirates Armed Forces, and Narendra Modi, Prime Minister of India, witnessed the signing of an historic agreement, today, awarding a consortium of Indian oil companies a 10% interest in Abu Dhabi's offshore Lower Zakum concession.
Lower Zakum is one of three new separate concession areas that make up the former ADMA offshore concession, namely Lower Zakum, Umm Shaif and Nasr and Sateh Al Razboot (SARB) and Umm Lulu. The restructuring of concessions is aimed at maximising commercial value, broadening the partner base, expanding technical expertise, and enabling greater market access.
The concession award to the Indian consortium, marks the first-time Indian oil and gas companies have been given a stake in Abu Dhabi's hydrocarbon resources.
Speaking at the signing, Prime Minister Modi said "The offshore concession in favour of the Indian consortium has taken our bilateral engagement in the oil and gas sector to a new level, which befits the comprehensive strategic partnership between our two countries. I am happy to note that we have progressed from a buyer-seller relationship to an era of mutual investments in the oil and gas sector."
The consortium, led by India's ONGC Videsh, contributed a participation fee of AED 2.2 billion ($600 million) to enter the concession. The concession will be operated by ADNOC Offshore, a subsidiary of ADNOC, on behalf of all concession partners.
The agreement, which has a term of 40 years and an effective date of March 9, 2018, was signed by Dr Sultan Ahmed Al Jaber, ADNOC Group Chief Executive Officer, and member of Abu Dhabi's Supreme Petroleum Council, and Shri Shashi Shanker, Chairman, ONGC Group of companies.
Dr Al Jaber said: "Our strategic partnership with ONGC, and the other members of the consortium, marks a new chapter in the strategic and economic relationship between the UAE and India. This mutually beneficial partnership will help India meet its growing demand for energy and refined products, create opportunities for ADNOC to increase its market share in a key growth market, and build a solid foundation as ADNOC explores potential international investments, particularly focused on downstream opportunities.
"This agreement demonstrates the confidence of the international market in ADNOC's long term production targets and ADNOC's strategy to maximise economic value and recovery from its offshore oil and gas resources. This is an attractive and strategic agreement for both parties that will deliver competitive returns and long term growth opportunities."
The Indian consortium is made up of ONGC's wholly owned subsidiary ONGC Videsh, which has stakes in 39 oil and gas projects, in 18 countries; the Indian Oil Corporation, India's largest commercial enterprise, encompassing the entire hydrocarbon value chain, which caters to nearly half of India's petroleum consumption with 11 of India's 23 refineries a 13,000-km pipelines network and a countrywide marketing set-up of over 47,000 customer touch-points, and Bharat PetroResources, which has stakes in 23 oil and gas assets in 7 countries and is a 100% subsidiary of Bharat Petroleum Corporation Limited which has interests encompassing the entire hydrocarbon value chain.
Shankar said: "We are delighted to be chosen by ADNOC to participate in this important offshore concession. This historic agreement will lead to further opportunities for Indian oil and gas companies to participate in the UAE's energy sector. The agreement reflects the vision of the Honourable Prime Minister of India towards strengthening hydrocarbon linkages with the UAE on a win-win basis."
Indian energy demand is forecast, by the International Energy Agency (IEA), to grow by more than any other country in the period to 2040, propelled by an economy that will grow to more than five-times its current size and by population growth that will make it the world's most populous country. Indian energy consumption is expected to more than double by 2040, accounting for 25% of the rise in global energy in the same period, and the largest absolute growth in oil consumption. Today, India is 79 per cent dependent on imports to meet its crude oil needs, 8 per cent of which is supplied by the UAE.
Expanded production from its offshore reservoirs are part of ADNOC's plans to raise its onshore and offshore production capacity to 3.5 million barrels a day by the end of 2018. Today, ADNOC's offshore fields produce about 1.4 million barrels a day.
ADNOC is finalizing opportunities, with potential partners, for the remaining 30% of the available 40% stake in the Lower Zakum offshore concession, earmarked for foreign oil and gas companies.
Alongside the concession award, ADNOC and the Indian Strategic Petroleum Reserves Ltd (ISPRL) exchanged agreements, today, to implement the strategic crude oil storage facility, in the southern Indian city of Mangalore. The partnership with ISPRL, an Indian government-owned company mandated to store crude oil for strategic needs, covers the storage of 5.86 million barrels of ADNOC crude oil in underground facilities, at the Karnataka facility.
The oil storage facility will help ensure India's energy security, as well as enable ADNOC to efficiently and competitively meet market demand in India and across the fast developing south east Asian economies. The decision to establish the strategic reserve was announced, in January 2017, during a visit to India by Sheikh Mohamed bin Zayed.
The current ADMA offshore concession, which expires on 8 March 2018, will be split into three separate offshore concessions. These will be operated by ADNOC Offshore.
Source: UAE Ministry of Foreign Affairs