UAE's ADNOC awards concession to Japan's Cosmo amid production capacity ramp-up

Dubai — Abu Dhabi National Oil Co. awarded Japan's Cosmo Energy Holdings Co. an offshore concession as the UAE's biggest energy producer speeds up exploration in a bid to boost its crude production capacity by 25% by 2030.

Cosmo will hold a 100% stake in the exploration phase of Offshore Block 4, investing up to $145 million, including exploration and appraisal drilling costs and a participation fee to explore for and appraise oil and gas opportunities in the block, ADNOC said Feb. 10 in a statement. The concession area spans 4,865 sq km northwest of Abu Dhabi.

Once a commercial discovery is achieved, Cosmo will have rights to produce from the concession, with ADNOC holding a 60% stake in that phase, which will span 35 years from the beginning of the exploration phase.

"In addition to drilling exploration and appraisal wells, the exploration phase will see Cosmo leverage and contribute financially and technically to ADNOC's mega seismic survey, which is acquiring 3D seismic data within the block area," ADNOC said. "The data already acquired over a large part of the block combined with its proximity to existing oil and gas fields suggests the concession area has promising potential."

Cosmo is the third concession winner from ADNOC's second international onshore and offshore bidding round that was launched in 2019. Occidental and a consortium of Eni and Thailand's PTTEP already won blocks in the round.

2030 target

The second bidding round is part of ADNOC's efforts to ramp-up exploration with a goal to boost oil production capacity to 5 million b/d by 2030 from over 4 million b/d now.

ADNOC has been awarding concessions to more Asian companies as it seeks to take on equity partners from a region that consumes most of its oil.

Japan is ADNOC's largest importer of oil and gas products and the Asian country receives around 30% of its oil from the UAE.

Cosmo is already engaged in the UAE energy industry through stakes in Abu Dhabi Oil Co. and Bunduq Oil Co.

ADNOC and ICE Futures Abu Dhabi, the exchange that will trade Murban futures when it is launched on March 29, have also signed agreements with Cosmo Oil Co., a unit of the parent company, and other Japanese end-users to explore the potential to price their crude using the new futures contract.

Those agreements with Japanese firms follow the signing of memorandums of understanding with Chevron, Trafigura and Occidental to explore using Murban futures to price US crude oil heading to Asia.

Japanese concessions

ADNOC in January last year signed an agreement with Japan's Agency for Natural Resources and Energy for the storage of over 8 million barrels of crude oil at facilities in the world's third largest economy. The agreement extended and expanded the storage agreement between the two countries that expired at the end of 2019.

Japan's INPEX has also won concessions in Abu Dhabi.

In 2019, INPEX won exploration rights for ADNOC's Abu Dhabi Onshore Block 4. In 2018, INPEX won a 10% stake in ADNOC's Lower Zakum offshore concession, an extension of INPEX's 40% stake in Satah, and an increase in its stake in Umm Al Dalkh from 12% to 40%. INPEX was awarded a 5% stake in the Abu Dhabi Onshore concession in 2015.