ADNOC, bp form Egyptian natural gas joint venture
(Bloomberg) – bp Plc and Abu Dhabi National Oil Co. (ADNOC) agreed to form a joint venture in Egypt to focus on natural gas, giving the United Arab Emirates access to production in a country that supplies the fuel to Europe.
The move is the latest in ADNOC’s push for international growth, following a multibillion-dollar pursuit of Covestro AG, and the purchase of stakes in a natural gas field in Azerbaijan and a fertilizer company. It would also deepen Egypt’s economic ties with the UAE, which has been a key backer of President Abdel-Fattah El-Sisi.
bp will contribute its interests in three development concessions, as well as exploration projects in Egypt to the venture, according to a statement. ADNOC will provide cash to help fund future growth opportunities, the company said, without providing a value.
Gas transactions have been high on ADNOC’s list of priorities, as it seeks more production and targets a bigger trading business. Egypt supplies liquefied natural gas to Europe through export plants on the country’s Mediterranean coast. European producers like bp and Italy’s Eni SpA have been working in the country for decades to develop fields that can supply both domestic and export markets.
The venture “represents a significant step forward as ADNOC builds its international natural gas portfolio,” Musabbeh Al Kaabi, the company’s head of low-carbon solutions and international growth, said in the statement.
bp and ADNOC have also worked together on a deal for gas in the Mediterranean region earlier through a joint bid for an Israeli producer. That’s now on hold because of war in the region.
Egypt’s Economy
The latest move gives ADNOC access to supplies from one of Egypt’s biggest natural gas fields — the Zohr deposit, which was discovered by Eni in 2015. bp holds a 10% stake in the Shorouk concession, which contains the Zohr field. Mubadala Investment Co., an Abu Dhabi state fund, owns a separate 10% in Shorouk.
bp’s 100% holding in the North Damietta concession, which contains the producing Atoll field, and its 50% stake in North El Burg, will also be transferred to the ADNOC joint venture. The North El Tabya, Bellatrix-Seti East and North El Fayrouz exploration permits will also be transferred.
bp will hold 51% of the venture and ADNOC the remainder. The deal is likely to be completed in the second half of this year.
The deal comes at a time when Egypt’s economy has been battered by inflation and the worst foreign-exchange crunch in decades. The UAE has previously provided support by buying stakes in some state assets. ADNOC had earlier shown interest in Egypt’s energy assets and was in talks to buy a major military-linked fuel distribution company, Bloomberg News reported in 2020.
Egypt has also been hit by the reduced passage of ships through the Suez Canal following attacks by Houthi militants on vessels further south in the Red Sea. That’s forcing shippers to avoid the waterway and instead take the longer route around Africa for voyages between Europe and the Middle East or Asia.
