Govt allows $400m venture in Abu Dhabi

ISLAMABAD: The government on Monday allowed a consortium of the country’s leading petroleum exploration and development (E&P) companies in the public sector to go for a $400 million exploration attempt in Abu Dhabi, United Arab Emirates.

The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Shaukat Tarin. It approved a summary of the “Petroleum Division regarding no objection certificate for issuance of the parent company guarantees/corporate guarantees by each of the consortium companies, on a joint and several basis, in favour of Abu Dhabi National Oil Company (Adnoc) and the Supreme Council for the Financial and Economic Affairs (SCFEA) to pursue international exploration and production opportunity in Abu Dhabi, UAE,” said an official statement.

The country’s three oil and gas majors – Oil & Gas Development Company Ltd (OGDCL), Pakistan Petroleum Ltd (PPL) and Mari Petroleum Company Ltd (MPCL) in collaboration with Government Holdings Pvt Ltd (GHPL) have formed a special purpose vehicle (SPV) to have 25pc shareholding ($100m) each in the $400m over a period of five years in the UAE exploration block.

The ECC decision would allow these four companies to issue guarantees to the SPV called NewCo in favour of Adnoc and SCFEA to qualify for the exploration block for which bid has already been submitted by the consortium.

Four public sector E&P companies to contribute $100m each

The ECC had about two years ago allowed the consortium to go for Abu Dhabi exploration with their initial investment out of their own resources. A few months ago, the consortium members reported to the stock exchange that each member company would invest about $100m each in case of successful bid. The NewCo consortium would be dissolved in case unsuccessful bid.

Official documents suggest that PPL had over the past six years gone for international exploration besides its oil and gas exploration and development activities within the country and had reported that along with its partners, it had drilled 79 exploratory wells including a well in Iraq, adding 0.6 trillion cubic feet (TCFs) of gas to the company’s reserve base.

With the objective to further expand its international operations, the company has identified another international oil and gas exploration and development opportunity in the UAE, Abu Dhabi and approached three others MPCL, OGDCL and GHPL with equal participation. Abu Dhabi is one of the world’s richest oil and gas states with production of more than 3 million barrels of oil per day and around 10 billion cubic feet per day of gas.

Although the blocks offered by Adnoc fall in the prolific area known for its rich hydrocarbon reservoirs nonetheless in case of no discovery the total exposure will be borne by the consortium of four participating E&P companies without any liability on the part of the GoP.