Total, Mubadala & IPIC..

Total, Mubadala & IPIC..

There has been some very interesting news coming from the Middle East E&P industry in July.

Firstly, Total announced an agreement with Qatar Petroleum to create a new company that will develop and operate the giant Al Shaheen offshore oil field in the Arab Gulf. The Joint Venture will be known as ‘North Oil Company’, and will be 70% owned by Qatar Petroleum and 30% by Total. As part of the JV, the state-owned oil and gas company licensed the rights for the production, sale and export of the field’s crude for 25 years, starting in July 2017. Total plans to invest $2 billion (USD) over five years to maintain the field’s output and increase production further. Patrick Pouyanne, Total’s CEO, said “Total is honored to have been awarded a 30% interest in the Al Shaheen concession. This is an important recognition of Total’s technical and commercial competence, and the Group will deploy its best technical expertise and experienced teams to this field”.

This further strengthens Total’s influence in the Middle East, having solidified their interests in Abu Dhabi’s concessions in 2015, where the company won a 10% stake in the UAE’s onshore oil fields under a 40 year agreement. Pouyanne said of the Qatar deal, “this agreement is in line with Total’s strategy to reinforce its presence in the Middle East, in particular by accessing giant fields and by complementing its portfolio with low technical cost oil assets”.

Total’s entrance to Al Shaheen also dealt a huge blow to Copenhagen based Maersk, the existing, but soon to be exiting, partner. Al Shaheen is one of the world’s largest oilfields, producing around 40% of Qatar’s crude oil, at approximately 300,000 barrels per day. Maersk Oil has developed and managed Al Shaheen since 1992, and Qatar accounted for close to half of the company’s 2015 output.

Along with Maersk, it is also believed that super majors, BP and Shell, were also unsuccessful with their respective bids.

While many question the magnitude of Total’s recent Middle East investments from a cost perspective, Qatar and the UAE are stable geopolitically, and solidifying a long-term commitment with such oil rich nations will be key to the company’s decision making process. Total’s current production in Qatar stands at 134,000 barrels of oil per day, while they have been operating the Abu Al Bukhoosh project in the UAE for decades.

Moving to Abu Dhabi, another huge deal was announced in July. Mubadala Development Company (MDC) and International Petroleum Investment Company (IPIC) announced a $130 billion merger plan. The Abu Dhabi Government is merging the two investment companies in a consolidation effort, primarily due to the slump in oil prices. This will of course involve not just the E&P sector, but various energy, utilities, technology, aerospace, health care, real estate, and financial investments. Detailed plans will come, however it will be worth keeping an eye on the future activities of OMV (25% owned by IPIC) and also Mubadala Petroleum (a wholly-owned subsidiary of Mubadala Development Company), who operate assets in South East Asia, as well as interests in the Middle East and Africa.

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