(Bloomberg) — Abu Dhabi awarded Japan’s Cosmo Energy Holdings Co. the right to explore for offshore oil and natural gas as the Middle Eastern emirate seeks to expand its output capacity.
Most energy producers have had to develop new deposits to replace older, depleting areas, even with the coronavirus pandemic hammering oil demand. But Abu Dhabi is taking the additional step of working through the downturn to expand its ability to pump oil.
Cosmo will invest as much as $145 million in the exploration phase at Offshore Block 4, government-owned Abu Dhabi National Oil Co. said Wednesday. Abu Dhabi holds most of the oil in the United Arab Emirates, the third-largest producer in OPEC.
If Cosmo discovers commercial quantities of oil and gas, it can enter a 35-year concession agreement to produce them. Adnoc will have the option of a 60% stake in the production partnership, it said in a statement.
Adnoc will spend $122 billion over the next five years to help boost its capacity to 5 million barrels a day by 2030 from around 4 million now. Last year, the UAE chafed against production limits imposed by the Organization of Petroleum Exporting Countries, arguing that they were too low for the country.
Even so, the UAE has largely complied with its quotas, and has expressed support for the supply-cuts deal between OPEC and allies such as Russia. The cuts have helped crude prices recover to more than $60 a barrel, roughly triple last year’s low in April.
Adnoc opened bids for exploration rights in 2019. In December it awarded exploration rights for desert deposits to Houston-based Occidental Petroleum Corp. A group comprising Italy’s Eni SpA and Thailand’s PTT Exploration & Production PCL won a contract later that month to look for hydrocarbons within an offshore block.
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