The onshore field is located inside the UAE and is owned by the Abu Dhabi National Oil Company or ADNOC.
The concession agreement, which was signed during the occasion of Indian Prime Minister Narendra Modi’s visit to the UAE, is valid for 40 years. Indian Oil is a direct participant, while ONGC and BPCL will participate through their wholly owned subsidiaries.
More than an economic move, the signing is seen as a political indication that UAE is willing to engage with India in the long term. This is the first time that Indian oil and gas companies have been given a stake in the development of Abu Dhabi’s hydrocarbon resources.
Indian companies are rarely allowed to acquire long-term interests in strategic assets in the Gulf due to geopolitical concerns.
“The ADNOC offshore concession in favor of the Indian consortium has taken our bilateral engagement in the oil and gas sector to a new level, which befits the comprehensive strategic partnership between India & UAE.”
About two years ago, Abu Dhabi’s crown prince Sheikh Mohammed bin Zayed Al Nahyan had announced that Abu Dhabi will invest around $75 billion in the infrastructure sector in India, via its sovereign funds. The size of the promised investment had caught observers by surprise as it is higher than China’s promised investments in Pakistan.
India has, since then, put in place a National Investment and Infrastructure Fund for facilitating the investment.
Speaking on today’s transaction, ONGC said sixty percent of the participating interest in the block will be retained by ADNOC and the rest will be awarded to other international oil companies.
Lower Zakum is one of three separate offshore concession areas that were formerly part of the ADMA offshore concession.
Both Modi and Sheikh Mohamed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, were present at the occasion.
ADNOC Group’s CEO, Dr Sultan Ahmed Al Jaber stated that this strategic partnership with ONGC and other members of the consortium would help India meet its growing demand for energy and refined products, and create opportunities for ADNOC Group to increase its market share in a key growth market.
However, it remains to be seen how useful stakes in hydrocarbon fields are going to be in the future as the role of hydrocarbons as the primary source of India’s energy is likely to come to an end within the next ten years.
However, hydrocarbons will continue to play a crucial role in manufacturing as they form the key ingredient in manufacturing many items of daily use, such as plastics.