Abu Dhabi’s ADNOC, Malaysia’s Petronas sign unconventional oil concession agreement

UAE President Sheikh Mohamed bin Zayed Al Nahyan and King Al-Sultan Abdullah Sultan Ahmad Shah of Malaysia, witnessed the signing of a historic concession agreement between the two countries.

The agreement, signed between Abu Dhabi National Oil Company (ADNOC) and Malaysia’s Petronas, is for Abu Dhabi’s unconventional onshore block 1, which covers an area of over 2,000 square kilometres in the emirate’s Al Dhafra region, official news agency WAM reported.

We have awarded the first unconventional oil concession in the Middle East to Malaysia’s @Petronas.

PETRONAS will bring its global experience in unconventional operations to further explore and appraise Abu Dhabi’s Unconventional Onshore Block 1. pic.twitter.com/j9Mg02POc5

— ADNOC Group (@ADNOCGroup) December 6, 2022

Under the six-year concession agreement, Petronas will hold a 100 per cent stake and operatorship to explore for and appraise unconventional oil in the block. This marks the first time a Malaysian company will invest in and explore for hydrocarbons in Abu Dhabi.

The six-year concession agreement builds on strong UAE-Malaysia ties and follows ADNOC’s de-risking of Abu Dhabi’s unconventional oil resources.

— ADNOC Group (@ADNOCGroup) December 6, 2022

“Unconventional oil” refers to crude oil that is obtained through methods other than traditional vertical well extraction, generally using relatively new and/or complex methods, according to investopedia.com. 

The concession agreement was signed by Dr Sultan bin Ahmed Al Jaber, Minister of Industry and Advanced Technology and ADNOC’s managing director and group CEO, and Datuk Tengku Muhammad Taufik, president and group CEO of Petronas.

“This award ushers a new chapter of strategic energy cooperation in the long-standing relationship between the UAE and Malaysia, and it reinforces the UAE’s position as a trusted investment destination,” said Dr Al Jaber.

“As one of the least carbon intensive oil and gas producers, ADNOC will continue to responsibly unlock value from Abu Dhabi’s vast hydrocarbon resources in a reliable and sustainable manner, to drive local economic growth and support global energy security. As such, we have driven the de-risking of Abu Dhabi’s unconventional oil resources and look forward to building on this with Petronas to realise the full potential of Unconventional Onshore Block 1.”

The concession award enables Petronas to capitalise on ADNOC’s prior exploration and de-risking activities.

“This partnership bears strong testament to deep unconventional expertise in Canada and Argentina, which we developed over the last decade, and we look forward to bringing this experience to the world-class resources in Abu Dhabi. It will also see Petronas widen its global unconventional energy footprint to include the United Arab Emirates in its existing portfolio,”  added Taufik.

Following an appraisal phase, the parties can enter a production concession with a term of 30 years from the first award of the concession to Petronas. ADNOC will have the option to hold a 50 per cent stake in the production concession. The agreement will see Petronas contribute financially to ADNOC’s ongoing three-dimensional (3D) mega seismic survey, which has already acquired seismic data within the concession area.

Abu Dhabi’s unconventional recoverable oil resources are estimated at 22 billion barrels of very light and sweet crude, comparable to ADNOC’s lower-carbon Murban grade.

Read: Abu Dhabi confirms massive oil discovery, set to add Dhs160bn to the UAE’s economy