A consortium led by India’s Oil and Natural Gas Corp (ONGC) has become the first group to win a stake in Abu Dhabi National Oil Co.’s (ADNOC) 40-year offshore oil concession, a deal set to help the UAE expand its foothold in Asia.
State-run ADNOC signed an agreement on Feb. 10 with the ONGC Videsh-led consortium giving the group a 10% stake in the new Lower Zakum offshore concession, with a participation fee of 2.2 billion dirhams (US$600 million), ADNOC said in a statement.
ONGC Videsh is the foreign investment arm of ONGC. Other members of the consortium are Indian Oil Corp. and Bharat Petro Resources Ltd., an upstream arm of refiner Bharat Petroleum Corp.
The contract signing in Abu Dhabi was attended by Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed al-Nahyan and Indian Prime Minister Narendra Modi. It is the first time for Indian oil companies to take part in an Abu Dhabi oil and gas concession.
ADNOC, like other major oil producers, wants to tap rising demand growth and invest in India, the world’s third-biggest consumer.
The concession deal “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,” Sultan al-Jaber, ADNOC’s CEO, said in the statement.
In August, ADNOC said it would split its ADMA-OPCO offshore concession into three areas—Lower Zakum, Umm Shaif and Nasr, and Sateh Al Razboot and Umm Lulu—with new terms to unlock greater value and increase opportunities for partnerships.
The agreement has a term of 40 years and an effective date of March 9, ADNOC said.
The existing ADMA-OPCO concession, in which ADNOC has a 60% stake that it will retain, produces around 700,000 barrels per day (bbl/d) of oil and is projected to have a capacity of about 1 million bbl/d by 2021.
ADNOC said it was still finalizing opportunities, with potential partners, for the remaining 30% of the available 40% stake in the Lower Zakum offshore concession.
In 2017, ADNOC signed a deal to store about 6 million barrels of oil at India’s Mangalore storage site, taking up about half of its capacity.