BP CEO Bob Dudley has been wooing Abu Dhabi’s government ahead of its decision on the renewal of its long-term oil production contract for Adco, the emirate’s largest onhore oil concession, and used a press conference to affirm the supermajor’s commitement to raise production at Iraq’s Rumaila oil field.
“Abu Dhabi and the emirates have been important to BP for 70 years,” Dudley told a press conference in the Emirate yesterday. “And we’d want to continue to cooperate with people, technology.”
BP currently has a 9.5% interest in the 1.4 million barrels per day Abu Dhabi Company for Onshore Oil Operations (Adco), under a long-term contract that is due to come to an end in 2014. The Abu Dhabi National Oil Company has confirmed that a decision on who is to participate in the renewed contract will be made within the next few months, and has warned IOCs to expect changes from the current contracts, under which margins are tight but not much is expected from ADNOC’s partners.
The British firm is one of several international supermajors which have operated in Abu Dhabi long-term but which may see their shares go to new entrants more willing to take lower profits for a stable foothold in a mature market.
BP’s key selling point is its expertise in meeting Abu Dhabi’s plans to increase oil production capacity from the Adco concession, and its commitment to knowledge sharing. The company – together with its other 40% partners in the venture Total (also 9.5%), Partex (2%), ExxonMobil (9.5%) and Shell (9.5%) – has been holding off on major investment in Adco assets until the new contract is confirmed.
Compared to BP’s more adventurous businesses in Russia and Iraq, the Abu Dhabi deal is low margin but uncomplicated, and retaining it would usually be routine for BP. However, with the company struggling to reignite growth in the wake of the Macondo disaster, keeping a foothold in Abu Dhabi will be a test for Dudley of whether he can maintain business as usual while pushing into frontier projects in emerging economies.
At the press conference, Dudley affirmed BP’s commitment to raising production at Iraq’s supergiant Rumaila oil field to 2.85 million bpd by 2017, despite a previous statement expressing doubt that Iraq could meet its national target of over 12 million bpd in that time due to severe infrastructure problems.
“We remain committed to heading towards that plateau and we are not in any discussions around changing the terms of our contract,” Dudley told Reuters said, adding that limits on exporting crude from the warn-torn country were the biggest obstacle. “There is a lot of work to do but there is a lot of potential.”
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