ADNOC, KNOC to explore undeveloped Abu Dhabi blocks
The Abu Dhabi National Oil Company (ADNOC) and the Korean National Oil Company (KNOC) signed on March 13, 2011 a separate Heads of Terms Agreement related to the further exploration and potential development of three undeveloped blocks held by ADNOC and believed to have more than 500 million barrels of oil in place. The new agreement will pave the road before the Korean companies to enter into the highly prized upstream sector of the Emirate of Abu Dhabi.
The signing of this agreement coincided with a wide range Memorandum of Understanding (MoU) on oil and gas sector concluded between United Arab Emirates and the Republic of South Korea, which was witnessed by UAE President H. H Sheikh Khalifa Bin Zayed Al Nahyan and the S. Korean President H.E., Lee Myung-bak.
Under the wide range, MoU signed between the two governments the government of Abu Dhabi is committed to open opportunities to qualified Korean exploration and production companies to participate in the upstream development of one or more fields with cumulative technically recoverable reserves of at least one billion barrels. The MoU also provides for the storage of six million barrels of Abu Dhabi crude oil in Korea's Strategic Petroleum Reserve (SPR). The storage arrangements will enhance the energy security of the Republic of Korea, while also giving ADNOC greater flexibility in supplying customers in the Korean and neighboring markets.
The MoU also grants Korean companies purchasing Abu Dhabi crude a first-right of refusal for the off-take of up to 300,000 barrels per day of Abu Dhabi crude. This volume would be made available gradually for Korean purchasers as Abu Dhabi continues to expand its production capacity in line with previously announced targets.
The various elements of this government-to-government agreement significantly bolster the energy security of the Republic of Korea. The agreement also creates new channels for foreign investment in Abu Dhabi's oil and gas sector, while enhancing Abu Dhabi's standing as one of the world's most secure sources of hydrocarbon fuels.
Within the context of mutual commitment to apply the standard practices of oil industry, the parties to the Heads of Terms agreement will proceed to negotiate the terms of a full contract, which, when finalized, would enable investment and implementation of an agreed exploration and potential development plan for the areas under the contract.
The agreements demonstrate the growing importance of the Korea-UAE relationship, as well as the substantial benefits resulting from the strategic partnership formed by the two governments following the award of the widely publicized UAE nuclear tender to a consortium of companies led by Korea Electric Power Corporation.