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UPDATE 2-UAE takes charge of big oilfields for now as western majors' deals expire

Daniel Fineren and Stanley Carvalho
Wednesday, 8 Jan 2014 | 2:58 PM ET

expire@

* Foreign oil company staff to keep working as service providers

* Disagreement over which companies best suited delays renewal

* Western oil majors' knowledge of fields may see them return

DUBAI/ABU DHABI, Jan 8 (Reuters) - Abu Dhabi will take full control of the UAE' biggest oilfields when its decades-old venture with four western oil giants ends this weekend, while it weighs new partnerships that could include its long-term collaborators or Asian newcomers.

The OPEC member country has held a 60-percent stake in Abu Dhabi Company for Onshore Oil Operations (ADCO) since acquiring an interest in fields that produce over half the United Arab Emirates' oil.

Four of the world's largest stock-listed energy companies - ExxonMobil, Royal Dutch Shell, Total and BP - have each held 9.5 percent equity stakes in the ADCO concession since the 1970s and would be keen to prolong their involvement.

After their current deal expires on Jan. 11, Abu Dhabi National Oil Company (ADNOC) will take 100 percent of the ADCO concession in what is seen as a temporary measure while political leaders in the UAE capital decide whether to let big Asian oil buyers in for the long-haul.

"All of the shareholdings of the foreign partners will go back to ADNOC," a spokesman for ADNOC said on Wednesday after a ceremony to mark the end of the 75-year existing partnership.

He declined to comment on when the government of Abu Dhabi might be ready to award the next long-term deals to run them.

The concession expiry means the western partners will not be paid in oil until the new partners are decided, but the companies will continue to work on the fields as service providers in the interim, an industry source said.

"The majors cannot be replaced from one day to the next, this does not end their working relationship," the source said.

The western oil companies are among the hopefuls vying to keep running the fields for decades to come and their technical experience in operating the fields is seen by many in the industry as vital to squeezing the most out of them.

Last year's award of a $10 billion gas project that will see Shell tackle highly toxic gas at a field within the ADCO concession strengthens its bid to continue operating the oilfields.

But in the half century that has passed since they made the first commercial oil discovery in 1960, western oil demand has started to wane, while consumption in Asia has soared, spurring Asian companies to seek security in stakes in oil and gas fields around the world.

ABU DHABI SPLIT

ADNOC director-general, Abdulla Nasser Al Suwaidi, said back in November 2012 that ADNOC would recommend that the Supreme Petroleum Council of Abu Dhabi (SPC) maintain the current partners.

The SPC in the past has typically gone along with ADNOC's recommendations.

But the dilemma now dividing the SPC, some industry observers say, is whether to stick with the U.S. and European companies or make room for some Asian newcomers. These would offer a chance to strengthen political ties with the UAE's biggest oil buyers such as China, Korea and Japan.

Until the Council can agree ADNOC will have full control.

"There is no one consolidated view of how the future Abu Dhabi upstream oil and gas sector should look," said Christopher Gunson, a Dubai-based lawyer at the law firm Pillsbury.

He said some in Abu Dhabi would like to see ADNOC run the concession alone in the long term, while other Abu Dhabi oil officials see more benefits to maintaining the status quo.

Abu Dhabi signed the 75-year agreements with western oil companies in January 1939. The government acquired a 60-percent share in the early 1970s and the Abu Dhabi Company for Onshore Oil Operations was formed in 1978.

Collectively the ADCO fields produce around 1.5 million barrels a day (bpd), compared with total UAE production of around 2.75 million bpd, with most of the output coming from five fields: Asab, Bab, Bu Hasa, Sahil and Shah.

ExxonMobil, Shell, Total and BP currently receive equity share of Murban crude from the fields.

ADNOC plans to sell these volumes through one-year term contracts with the oil majors while the OPEC producer decides which companies will become its equity partners.

Some big oil companies, notably ExxonMobil, have expressed concern about operating side by side with rivals in an ADNOC-controlled concession, with all partners expected to share their technology.

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