Wednesday, June 23, 2010

Foreign oil firms' profits drop

A steep fall in crude prices and local production depressed the income of international oil companies (IOCs) operating on a partnership basis in the UAE to one of its lowest levels in 2009, official figures showed yesterday.

From nearly Dh18.2 billion in 2008, the earnings of those companies, which are concentrated in Abu Dhabi, tumbled by nearly two thirds to about Dh6.8bn in 2009, showed the figures by the Central Bank.

It gave no reason for the decline but industry sources attributed it to a sharp drop in oil prices and a cut of more than 200,000 barrels per day in the UAE's oil output under a collective Opec (Organisation of Petroleum Exporting Countries) agreement to trim supplies to bolster prices.

Last year's income was one of its lowest levels in current prices since IOCs began operating in Abu Dhabi more than half a century ago.

Oil prices hit an all-time average of $95 a barrel in 2008 before plummeting to nearly $62 in 2009. Crude output by the UAE also slumped to around 2.3 million bpd in 2009 from more than 2.5 million bpd in 2008.

The decline in oil prices and production slashed the country's total hydrocarbon export revenues to around $59bn (Dh216bn) last year from a record high of about $108bn in 2008, according to independent estimates.

Figures by the Ministry of Economy showed the income of foreign oil partners had steadily climbed in previous years because of a rise in crude prices and high production by the UAE. It estimated their profits at about Dh13.9bn in 2004 and nearly Dh19.7bn in 2005. The revenues surged to around Dh24.4bn in 2006 and peaked at nearly Dh26.9bn in 2007.

The bulk of IOCs operate in Abu Dhabi, the largest UAE hydrocarbon producing emirate where they have interests in most of the 21 oil and gas ventures controlled by the state-owned Abu Dhabi National Oil Company (Adnoc). They include British Petroleum, ExxonMobil, Shell, Total, Partex, the Japan Oil Development Company (Jodco) and other IOCs.

Adnoc has controlling interest in all local operating hydrocarbon companies while the remaining shares are held by foreign partners.

The main local operators include Abu Dhabi Company for Onshore Oil Operations (Adco), which is held by Adnoc (60 per cent) and a consortium comprising BP (9.5 per cent), Shell (9.5 per cent), Total (9.5 per cent), ExxonMobil (9.5 per cent) and Partex (two per cent). Another key firm is Abu Dhabi Marine Operating Company (Adma-Opco), which is also controlled 60 per cent by Adnoc. The rest is owned by BP (14.7 per cent), Total (13.3 per cent), and Jodco (12 per cent).

Zakum Development Company (Zadco), which operates one of the largest oilfields in the world, is controlled by Adnoc (88 per cent) and a consortium (12 per cent) comprising BP, Jodco and Total.

Abu Dhabi has not disclosed details of IOCs' earnings but under their partnership agreements, Adnoc is believed to be paying $1 for every produced barrel to foreign partners, regardless of the oil price on the market. Industry sources said they also include other revenue arising from operations and marketing, depending on the shareholding and contract with each IOC.

Adnoc, one of the largest oil producing companies in the world, had pumped more than 2.7 million bpd of crude oil and condensates over the past three five years. Its revenues have sharply grown during that period as a result of rapid rise in crude prices, which have averaged above $40 a barrel since 2004.

By Nadim Kawach

© Emirates Business 24/7 2010

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