Want to make of a series of high-profile consolidations in Abu Dhabi this year? The Abu Dhabi National Oil Co. (ADNOC) is the latest entity to enact structural changes—all in an effort to drive down costs and increase efficiency.

In early October the state-owned oil firm announced the consolidation of two of its largest offshore subsidiaries: the Abu Dhabi Marine Operating Co. (ADMA-OPCO) and the Zakum Development Co. (ZADCO). This one consolidated organization will eventually manage all of the associated offshore oil concessions.

The announcement is in sync with ADNOC’s emphasis on optimizing costs and streamlining operations across the firm’s 19 subsidiaries and joint ventures (JV). This process was initiated at the beginning of 2016.

ZADCO operates three offshore fields. Its most important field, Upper Zakum, covers 1,200 sq km (463 sq miles) and has about 50 Bbbl of oil in reserves. Oil is processed at a facility on nearby Zirku Island, along with oil from ZADCO’s Umm Al Dalkh and Satah fields.

ADMA-OPCO produces oil from two primary fields, Umm Shaif and Lower Zakum, with crude transported to the company’s Das Island facilities for processing, storage and export.

ADNOC looks to boost production levels—current output is 3.1 MMbbl/d, with a target of 3.5 MMbbl by 2018.

Offshore development remains a key focus of the company. ADNOC’s offshore fields contribute a combined 1.2 MMbbl, with production expected to reach 1.7 MMbbl next year, thanks to output at the Satah Al Rasboot, Nasr and both Umm fields as well as completion of the UZ750 project.

The $10 billion UZ750 development, which consists of the construction of four artificial islands, aims to increase daily production at the Upper Zakum field from 640,000 bbl/d to 750,000 bbl/d by next year. With Abu Dhabi’s offshore fields pointing to promising yields, the firm’s capex spend has remained in line with past years to meet the company’s 2018 target.

Meanwhile, international spending on E&P is expected to decline by 21% year-on-year in 2016, according to Barclays’ revised forecast released in March.

While offshore fields are more technologically challenging, and thus more expensive to develop, recovery techniques such as dredging and the incorporation of artificial islands are helping to bring down the long-term costs of these ventures.

According to CEO of ADNOC Sultan Al Jaber, the consolidation of the two entities represents a logical next step in achieving the company’s objectives around people, efficiency, performance and profitability.

“It will unite our offshore experience, streamline governance and decision making, and give management a better line of sight through the company’s operations,” he said.

The operating costs of ADMA-OPCO’s Satah Al Rasboot Field, for example, already were set to be reduced with a move to link services with Zirku Island, itself belonging to ZADCO.

Additionally, the combined Upper and Lower Zakum fields previously divided between ADMA-OPCO and ZADCO, respectively, constitute the largest single offshore field in the world in terms of reserves.

ADNOC’s international partners are working with the firm throughout this whole integration process.

Currently, ADNOC holds a majority share of ADMA-OPCO at 60%, with the remaining shares owned by BP (14.67%), Total (13.33%) and the Japan Oil Development Co. (JODCO, 12%). Likewise, ZADCO is a partnership between ADNOC (60%), Exxon Mobil (28%) and JODCO (12%).

In the near term, a steering committee has been appointed by ADNOC and its JV partners to oversee the integration, with the consolidation process to be completed by early-2018.

“The existing concession rights of our partners in the concessions currently operated by ADMA-OPCO and ZADCO will not be affected by the consolidation,” Al Jaber said in early October.

However, international firms are positioning themselves for the expiration of ADMA-OPCO concessions in 2018; ZADCO’s concessions do not expire until 2041.

ADNOC’s consolidation is the latest in a series of moves in the emirate.

In August Abu Dhabi-based investment and development company Mubadala Development Co., which owns Mubadala Petroleum, merged with the International Petroleum Investment Co., with $125 billion of combined assets. This consolidation brings together two of the emirate’s most important investment companies, offering a range of domestic and international energy portfolios.

—Gordon Feller