CNPC and Abu Dhabi National Oil Company (ADNOC) announced the signing of an agreement to award CNPC International, a wholly owned subsidiary of CNPC, an 8% stake in US$22 billion worth of Abu Dhabi Company for Onshore Petroleum Operations’ (ADCO) concession.
According to Greg Hammond, a partner at Eversheds Sutherland in London, this sizable deal means access to a share in 20 to 30 billion barrels and is geo-politically important as it links the UAE to China on a government-to-government basis, relying on the projected growth of China and its increasing demand for hydrocarbons as a future purchaser of oil. Also worthy of emphasis was “the importance of the technology, which the stakeholders will contribute to the project going forward,” said Hammond.
An important element of both the original tender process and the transaction itself was the use of technology, he said.
“ADNOC has actively sought to maximize recovery of hydrocarbons from the onshore concession by inviting international oil companies with proven technological expertise to tender,” he said. “The use of enhanced oil recovery techniques, or EOR, and other technologies by these international oil companies will of course be beneficial to all concession-holders over the term of the new onshore concession.”
Hammond said the transaction was important for the China market because it would provide access to a secure and sizeable supply of high-quality crude oil over a 40-year period. It could also be expected to enhance China’s influence with, and trade into, the UAE, a key political and commercial power within the Gulf region. “The aggregate Chinese stake in the onshore concession now comprises 12% of an estimated 20 to 30 billion barrels over the term of the renewed concession,” he said. “By any measure this is a very significant amount of oil.”
The Eversheds team advised CNPC in this deal. The firm’s teams were led by Beijing managing partner Ingrid Wenying Zhu-Clark, Abu Dhabi managing partner Tim Armsby and London partner Greg Hammond.