Japan's Inpex to lift more Abu Dhabi equity oil as emirate boosts output

Japan's Inpex expects to lift more Abu Dhabi equity oil in April as the emirate is boosting production to supply more than 4 million b/d at a time when competition is intensifying for customers among oil producers as the coronavirus pandemic increasingly hits the demand for petroleum.

"In line with the production increase, we expect our equity crude lifting volume to rise for a certain volume," a spokesman said Monday for Inpex, which has stakes in Abu Dhabi's onshore and offshore oil fields, including the Upper Zakum and Lower Zakum offshore fields.

Inpex, which is also the asset leader of the Lower Zakum oil field, does not currently see any impact from the COVID-19 on oil production and shipments in Abu Dhabi oil fields, the spokesman said.

Abu Dhabi National Oil Co., the UAE's biggest producer -- pumping some 3 million b/d -- said on March 11 it can supply the market with over 4 million b/d of crude in April.

The UAE is following in the footsteps of Saudi Arabia, which has announced plans to boost its production capacity by 1 million b/d to 13 million b/d as the price war and flood of oil supply picks up. Saudi Arabia has also said it would supply the market in April with some 12.3 million b/d, an increase of 300,000 b/d on its maximum sustained capacity of 12 million b/d.

ADNOC Onshore, which produces flagship crude Murban, is set to boost its production capacity by 200,000 b/d to 2 million b/d this year, while the offshore Upper Zakum concession is expected to ramp up by 100,000 b/d to 750,000 b/d this year.

Inpex, though its JODCO subsidiary, has a 5% stake in ADNOC Onshore, and 12% in Upper Zakum.

Saudi Arabia and the UAE are the only two Gulf OPEC producers to publicly announce plans for major supply ramp-up and production capacity boosts.

Pricing strategy

Inpex, which holds equity in three out of four of ADNOC's crude grades, would likely benefit from the emirate's new pricing strategy, which ADNOC revised as a response to "unprecedented market conditions" earlier this month.

The Abu Dhabi entity issued prospective price differentials based on Platts front-month Dubai crude assessments for March and April loading cargoes, splitting from its typical methodology of retrospective pricing.

In doing so, ADNOC also cut the prices of its April loading crude grades to match those issued by other Middle East crude producers.

ADNOC cut the price of Murban to a discount of $2.75/b to Platts front-month Dubai crude assessments for April loading. The April price is down $6.26/b from January, mirroring a $6/b cut for Saudi Arabian Extra Light earlier this month.

Inpex, Japan's largest upstream company, produced a record 586,200 b/d of oil equivalent in April-December 2019 due in part to increased production in Abu Dhabi. For 2020, Inpex has said it expects the Ichthys and Prelude LNG projects in Australia to continue to drive its oil and gas production up to 608,000 boe/d.