Malaysia’s state-owned oil and gas giant Petronas and Abu Dhabi National Oil Company (Adnoc) have signed the first unconventional oil concession in the Middle East.

Under the six-year agreement, Petronas will hold a 100% stake and operatorship to explore for and appraise unconventional oil in Unconventional Onshore Block 1. The block covers an area of more than 2,000 square kilometres in Abu Dhabi’s Al Dhafra region. 

Unconventional oil refers to reserves that cannot be feasibly accessed using conventional drilling techniques, such as shale oil and bitumen, and which must be extracted using novel methods. Conventional oil usually refers to crude oil, which is extracted through conventional vertical drilling techniques.

The concession agreement was signed by Sultan Ahmed Al Jaber, UAE minister of industry and advanced technology and Adnoc managing director and group chief executive officer, and Datuk Tengku Muhammad Taufik, Petronas president and group CEO, during the visit of the Malaysian King, Sultan Abdullah Sultan Ahmad Shah, to the United Arab Emirates earlier this month. The concession enables Petronas to capitalize on Adnoc’s prior exploration and de-risking activities. Petronas brings its global experience in unconventional operations and both companies have a strong track record and commitment to responsible operations with a focus on lower-carbon oil and gas production.

Tengku Taufik comments: “This partnership bears strong testament to deep unconventional expertise in Canada and Argentina, which we developed over the last decade, and we look forward to bringing this experience to the world-class resources in Abu Dhabi. It will also see Petronas widen its global unconventional energy footprint to include the United Arab Emirates in its existing portfolio.”

Following a successful appraisal phase, the parties can enter a production concession with a term of 30 years from the first award of the concession to Petronas, with Adnoc having the option to hold a 50% stake in the production concession.

The block offers the potential to create significant in-country value for the UAE over the lifetime of the concession.

The agreement will see Petronas leverage and contribute financially to Adnoc’s ongoing three-dimensional mega seismic survey, which has already acquired seismic data within the concession area.  Abu Dhabi’s unconventional recoverable oil resources are estimated at 22 billion barrels of very light and sweet crude, comparable to Adnoc’s flagship lower-carbon Murban grade. These independently verified resources have production potential comparable to the most prolific North American unconventional plays.