(Bloomberg) -- OMV AG and Abu Dhabi’s government-owned oil producer signed a $1.5 billion concession agreement for crude production in waters off the Middle East emirate’s coast.
Abu Dhabi National Oil Co. granted Vienna-based OMV 40-year rights to pump crude from the Satah Al Razboot, or SARB, and Umm Lulu fields, it said Sunday in a statement. The deal is a step in OMV’s effort to expand its oil production and refining business, and it marks the final stage of Adnoc’s selection of international partners at producing fields in the Persian Gulf.
Austrian Chancellor Sebastian Kurz and Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed witnessed the signing on Sunday at the emirate’s presidential palace. Adnoc Chief Executive Officer Sultan Al Jaber and his OMV counterpart Rainer Seele also agreed to look for other opportunities to work together.
“We’re producing oil, and we have an interest to extend our cooperation with Adnoc,” Seele said Sunday in an interview. The company is aiming for upstream and downstream cooperation in the emirate, he said.
Total, Eni, CNPC
Abu Dhabi, the second-biggest shareholder in OMV after the Austrian government, is seeking partners to explore for oil and to boost capacity in refining and chemicals output. OMV joins Spanish refiner and producer Cia Espanola de Petroleos SA, or Cepsa, as the second foreign partner in the SARB and Umm Lulu concession. The two European companies will each have a 20 percent stake in the block, with Adnoc holding the remaining 60 percent.
OMV expects to spend about $2 billion over the life of the contract for its share of project costs, it said in a statement. The company will spend about $150 million a year for the first five years of the deal, it said.
Adnoc said it’s targeting oil production of 215,000 barrels a day from the concession, without specifying timing for reaching that level. The Umm Lulu field started producing in the fourth quarter of 2016, and SARB is set to pump first oil this year, OMV said.
“The expansion of the global economy and increasing demand for oil, refined products and petrochemicals provide us with new opportunities,” Adnoc’s Al Jaber said in the statement. “To seize these opportunities, we will work closely with OMV, and our other partners.”
Abu Dhabi’s state-run Mubadala Investment Co. holds 24.9 percent of OMV and owns all of Cepsa.
Adnoc has raised $7.92 billion in fees from the international companies taking stakes in three offshore production areas, it said in the statement. Total SA, Eni SpA, China National Petroleum Corp. and an ONGC Corp.-led Indian group are the other companies to have secured production rights there. Abu Dhabi holds about 6 percent of global crude reserves and pumps most of the oil in the United Arab Emirates.
OMV’s 10 billion-euro ($12.1 billion) budget for buying new assets until 2025 could include upstream and downstream investments in Abu Dhabi, Seele told investors last month. The company said it targets expansion in the Gulf region and in Asia, where fuel demand is rising together with population growth.
Seele has pivoted OMV away from expensive oil production in the North Sea and toward lower-cost oil and gas fields in the Middle East and Russia. OMV is also considering a minority stake in Adnoc’s refining business, people familiar with the talks said.
“We are starting with oil production, but we also want to refine it,” Seele told the Abu Dhabi news conference. This could include taking a stake in a refinery, he said, without elaborating.
©2018 Bloomberg L.P.