Picture: ISTOCK
Picture: ISTOCK

Abu Dhabi — Indian companies agreed to pay $600m for a stake in one of Abu Dhabi’s biggest offshore oil concessions, securing a share in the emirate’s crude production for the first time.

State-owned Oil and Natural Gas Corporation (ONGC) and two other Indian companies will take a 10% share of the concession to pump crude from the Lower Zakum field under a 40-year contract in partnership with Abu Dhabi National Oil Company (Adnoc), an Adnoc statement read. Adnoc signed the deal during a visit of Indian Prime Minister Narendra Modi to the United Arab Emirates (UAE) capital on Saturday.

Abu Dhabi is looking for new partners at its offshore fields in the Persian Gulf as the current production concession for some deposits expires in March.

The Indian companies will pay 2.2-billion dirhams ($600m) to Abu Dhabi for their stake in the field, according to the statement. That puts the overall value of the concession at $6bn. Adnoc, which retains 60% holdings in its fields, aims to award rights for an additional 30% of Lower Zakum as well as rights to two other offshore crude blocks.

The Indian consortium comprises ONGC’s wholly owned subsidiary ONGC Videsh, Indian Oil and Bharat PetroResources, which is a 100% subsidiary of Bharat Petroleum, the Adnoc statement reads. Adnoc Offshore, a subsidiary of Adnoc, will operate the concession on behalf of all the partners. Expanded production from its offshore reservoirs is part of Adnoc’s plans to raise its onshore and offshore output capacity to 3.5-million barrels a day by the end of 2018. Adnoc’s offshore fields produce about 1.4-million barrels a day.

Current production at the Lower Zakum field is about 400,000 barrels a day, and the plan is to increase the plateau target to 450,000 barrels a day by 2025, according to a statement from ONGC Videsh.

The Indian win gives the country a direct stake in Middle Eastern barrels. India is the second-biggest buyer of UAE crude behind Japan.

The deal enables Adnoc to tap demand in the world’s second most populous nation.

"For India, it’s a way to secure a lot of long-term oil supply to help fuel growing demand," said Edward Bell, a commodities analyst at lender Emirates NBD PJSC in Dubai.

"For Adnoc it firms up a relationship with one of its biggest buyers and continues the company’s strategy of bringing the big Asian consumers into partnerships and joint projects."

The state producer signed deals in 2017 with Chinese and Korean companies to partner in its main onshore fields for the first time. Adnoc is seeking partnerships in refining and petrochemicals and may buy assets abroad to secure market share.

Adnoc also signed an agreement with the Indian Strategic Petroleum Reserves for a storage facility in the Indian city of Mangalore.