Korea’s GS Energy takes 5% stake in Abu Dhabi’s onshore oilfields

Korea’s GS Energy, backed by the state-owned Korea National Oil Company, will take a 5 per cent in Abu Dhabi’s prime onshore concession.

The deal is the latest in a long-running process whereby Abu Dhabi National Oil Company and the Supreme Petroleum Council have been allocating 40 per cent of the company that operates 15 onshore oilfields, which account for more than half the country’s daily oil output.

The Adco concession, as it is called, expired at the end of 2013 and Adnoc has been evaluating bids for new 40-year contracts for more than a year. The concession produces 1.6 million barrels per day, which is expected to rise to 1.8 million bpd by the end of 2017 under Abu Dhabi’s plan to expand total production from 2.8 million bpd to 3.2 million bpd.

France’s Total was the first to win a stake earlier this year, paying US$2.2 billion for a 10 per cent share in Adco and operational control over two of the most sought after fields.

Two weeks ago, Japan’s Inpex said it had won a 5 per cent share in Adco.

The contenders for the remaining 20 per cent include shareholders in the old concession, BP and Royal Dutch Shell, as well as PetroChina. Bidders have been asked to submit for 10 per cent or 5 per cent stakes.

Like Japan, Korea imports almost all of its oil and relies on Abu Dhabi for a significant share: it imported 12 per cent of its 2.5 million barrels a day form the UAE in 2013, according to the Energy Information Agency.

A spokesman for GS Energy, Chung Hae Hung, declined to provide details of the concession but said that Adco would be issuing a statement on the deal.

After Total was awarded its stake in January, Adnoc had asked remaining bidders to match the French company’s terms, which has meant upfront payments of $1.1bn from both Inpex and the Koreans.

GS Energy is a subsidiary of GS Holdings, the energy, retail and construction conglomerate controlled by the Huh family, led by Huh Chang Soo, chairman and chief executive of the group.

The company owns substantial refining interests via GS Caltex, a joint venture with Chevron which has been spun off as an independent company and which has bought crude oil from Abu Dhabi for more than three decades.

GS Energy is the focus of the group’s oil exploration interests, which comprises half a dozen projects in the UAE and South East Asia. It has operated in Abu Dhabi for the past three years, developing three blocks in partnership with KNOC, including the Haliba field on the Omani border, in which it has a 10 per cent stake and KNOC 30 per cent.

According to a newspaper report in Seoul in March, KNOC will jointly finance GS Energy’s stake in Adco. The deal will make GS Energy the largest oil producer in Korea, pushing its daily oil capacity to 90,000 bpd, ahead of SK Innovation’s 77,000 bpd.

Korea’s deal was signalled in March when South Korean president Park Geun-hye led a trade mission to Abu Dhabi that highlighted a new geosciences joint project with KNOC. Suh Moon-kyu, KNOC’s chief executive, said then that the project was aimed specifically at improving the Haliba field project.

KNOC said it had extracted 18,000 barrels of crude from appraisal wells in the Haliba field in tests last year and confirmed that its chemical component was close to Abu Dhabi’s flagship Murban crude.

Production there is expected to be at 5,000 bpd by the end of 2017, rising to 40,000 bpd in 2019. Potential recoverable oil in the three fields is estimated to be nearly 1 billion barrels.


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