The Wall Street Journal: Abu Dhabi Picks ExxonMobil As Partner In Zakum Field

DOW JONES NEWSWIRES

June 20, 2004 6:17 a.m.

Posted 21 June 04

MANAMA, Bahrain -- Abu Dhabi oil authorities have picked U.S. oil major ExxonMobil Corp. (XOM) as a strategic partner in the offshore Upper Zakum oil field, after prolonged talks with a number of foreign bidders, the Middle East Economic Survey weekly newsletter reports in its Monday edition.

MEES said Abu Dhabi had in fact shortlisted Royal Dutch/Shell Group (RD SC), BP PLC (BP), ChevronTexaco Corp. (CVX) and Japan Offshore Development Co., or Jodco, but excluded France's Total S.A. (TOT) from the selection process. There were reports of differences among Abu Dhabi officials over whether to choose a U.S. or a European company.

The long-awaited decision was taken some three months ago, but a formal announcement has been postponed because of the politically sensitive nature of the matter, the newsletter added, noting that no date has been set for a formal announcement of the final selection.

An earlier agreement on the deal was drafted in September 2000 between the state-owned Abu Dhabi National Oil Co. (ADI.YY), or Adnoc, and a consortium of BP and Total, subject to approval by the emirates' Supreme Petroleum Council. However, the SPC failed to approve the deal, MEES said.

Subsequently, ChevronTexaco, ExxonMobil, Shell and Jodco, in addition to earlier bidders BP and Total, were asked to submit bids for a 28% equity stake in the field operator, Zakum Development Co., or Zadco, together with a development program for the field.

A final decision has been awaited ever since, MEES said.

MEES noted that Zadco, the operator, is 88% owned by Adnoc, with the remaining 12% held by Jodco.

The field's current production capacity is around 550,000 barrels a day.

Abu Dhabi wants to further develop Upper Zakum as part of Adnoc's overall plans to raise Abu Dhabi's sustainable capacity to around 3 million b/d by the end of this decade.

However, while there are major crude reserves of around 50 billion barrels of oil in the field, the tight rock structure in the reservoir is resulting in water encroachment and a low recovery rate, meaning that large-scale investment and advanced technology will be required to develop it, MEES said.

-By Abdulla Fardan, Dow Jones Newswires; (973) 17530758; abdulla.fardan@dowjones.com