Adnoc has awarded a consortium of Eni (70%) and Thailand’s PTTEP (30%) the exploration license for Offshore Block 3. The award is the second to be made under Adnoc’s second licensing round, following the award of an onshore block to US firm Occidental (Oxy) earlier this month (MEES, 11 December).
Eni and PTTEP are now partnering at three of Abu Dhabi’s exploration blocks, having previously been awarded two offshore blocks in January 2019 in the emirate’s debut licensing round (MEES, 18 January 2019). So far, this second licensing round is proceeding much like the first, with the same firms picking up acreage in both rounds.
Under the terms of the agreement, Eni and PTTEP will invest up to $412mn towards exploration and appraisal drilling. The consortium has a 100% stake in the exploration phase, and Adnoc has the option to take a 60% stake in any production phase. The exploration phase can last up to nine years, and if production begins then the overall concession term will be 35-years.
The award bolsters two of Adnoc’s key objectives in bringing in partners. Firstly, it secures Eni’s technical expertise in targeting potentially-challenging reserves. Secondly, it strengthens commercial relations with Thailand, a key importer of Adnoc’s oil.
“This concession award reinforces Adnoc and Eni’s growing partnership across our value chain and deepens our relationship with Thailand’s PTTEP, one of the key markets for our crude oil and products,” says Adnoc CEO Sultan al-Jaber. “This again validates our targeted approach to value-add partnerships that contribute the right combination of capital, technology, capabilities and market access to accelerate the development of Abu Dhabi’s hydrocarbon resources.”
Over the first ten-months of 2020, Thailand imported around 290,000 b/d of crude from the UAE. This makes the UAE Thailand’s largest supplier and Thailand the UAE’s fourth largest market behind China, India and Japan.
TAKING ON THE CHALLENGE
Offshore Block 3 is 11,660 km² in area and abuts the other exploration acreage held by Eni/PTTEP (see map). It stands apart from the other exploration blocks in that it overlays existing offshore concessions. When launching the bid round last year, Adnoc said the block “will be awarded to explore exclusively for potential gas in deep geological formations and potential oil in various formations, outside the existing concession areas” (MEES, 3 May 2019).
Eni CEO Claudio Descalzi says “Offshore Block 3 represents a challenging opportunity that can unlock significant value thanks to exploration and appraisal of shallow and deep reservoirs.”
Adnoc says the partners will utilize 3D seismic images “of the complex geology at ultra-deep locations” to identify potential hydrocarbon reservoirs. It adds that the seismic data and the block’s proximity to existing oil and gas fields suggests the area “has promising potential.”
Eni flags up that the block is near producing and under-development fields at which the firm participates. “The near-field nature of the exploration targets will allow to exploit the synergies with the nearby existing infrastructure.”
Eni’s near-field producing assets are a 5% stake in the 360,000 b/d capacity Lower Zakum offshore concession, and 10% in the 310,000 b/d Umm Shaif & Nasr concession. Eni also has 25% in the 1.5bn cfd Ghasha sour gas concession. The first 340mn cfd phase of this is due online from the Dalma field in 2023.
Until 2018, Eni had no UAE assets, but now the country is a major area of investment for the firm. Eni’s net UAE production last year was 49,000 b/d.
As for when Offshore 3 drilling will begin, no details were provided. However, the consortium has a lot of other near-term plans with its pre-existing assets. PTTEP said recently that “The Abu Dhabi Offshore 1 Project is currently being evaluated for petroleum potential for future exploration. The Abu Dhabi Offshore 2 Project, is currently being evaluated for petroleum potential to prepare for the drilling of the first exploration well.” Offshore 2 drilling is slated for 2021.
Adnoc has ambitious plans to boost oil capacity from 4mn b/d to 5mn b/d by 2030 and achieve gas self-sufficiency. While these exploration licenses may contribute towards achieving these targets, they are primarily intended to sustain output once these targets are met.
