Just a week after clashing with its OPEC partners over production limits, the United Arab Emirates has awarded oil-exploration rights to Occidental Petroleum Corp., moving quickly to expand output capacity.
According to reports, Government-owned Abu Dhabi National Oil Co. picked Occidental to explore for oil and natural gas at a block in the desert along the UAE’s border with Oman, ADNOC said Wednesday in a statement. The block is adjacent to an exploration area that ADNOC awarded to Occidental last year.
Houston-based Occidental is set to invest as much as $140 million in the new area, known as Onshore Block 5, during the exploration phase, the duration of which wasn’t disclosed.
Abu Dhabi is the UAE’s capital and largest emirate, and its fields produce almost all of the country’s oil. The Supreme Petroleum Council, which sets Abu Dhabi’s energy policy, last month approved a $122 billion budget to help ADNOC boost production capacity by a fourth to 5 million barrels a day by 2030.
That target highlights the UAE’s unhappiness with output limits imposed by the Organization of Petroleum Exporting Countries and allied producers like Russia as the cartel tries to prop up oil markets. The so-called OPEC+ alliance has capped the UAE’s output at roughly 2.6 million barrels a day until the end of the year.
The group agreed last week to raise collective supply by 500,000 barrels a day in January, allowing the UAE — OPEC’s third-largest producer — a slight increase. Even so, the UAE has made clear that it chafes at its quota, going so far as to signal last month that it might pull out of OPEC.
The country argues that the baseline of which its production cuts are determined was set too low, forcing it to reduce output by more than its fair share. Any revision of baseline levels could prove contentious for OPEC+; other members like Iraq and Nigeria have at times also exceeded their quotas and argued for higher limits.
The Occidental award won’t have an immediate effect on UAE production because such exploration deals can take years to yield commercial quantities of hydrocarbons. If the U.S. company finds oil or gas, it could get a 35-year concession in partnership with ADNOC.