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Date: 2016-08-12

Rivalry of Eastern and Western Oil Companies in U.A.E

Zheng Nie

It has been almost a year since the expiry of the 75-year-old concession of Abu Dhabi with western oil companies. Having been working as service providers and not getting paid in oil this past year, the Western oil companies are among the hopefuls to win the bidding for Abu Dhabi’s new oil concession. These companies are hoping to keep their stakes in the Persian Gulf, which is the one of the few major oil-producing areas that allows international companies to hold direct shares. Now they are worried about losing their stakes because of the rising interest of Asian oil companies in this lucrative oil business.

Having the plan to increase oil output, Abu Dhabi is looking for more oil companies with advanced technology and drilling knowledge to help it meet its goal. It is not enough to have just Western oil companies in the oil field. The participation of Asian oil firms is critical because they could bring different utilities and perspectives to the oil industry. Moreover, Gulf nations appreciate countries staying out of its regional politics. They would like to do business with Asian countries rather than Western countries, which have a long history of involvement in politics in the Middle East. This has already been seen in some significant deals in the United Arab Emirates. For example, it signed a $20 billion nuclear power plant deal with a South Korean-led consortium and gave a $4 billion oil pipeline project to Chinese contractors.

While Western oil demand is shrinking and the oil companies have recently began decreasing oil production, the growing demand in the Asian market is pushing Asian oil companies to look for more oil fields and invest millions into enormous oil production projects. Without a doubt, Asian companies are going to have to compete to secure oil shares in the Persian Gulf. To gain entrance to these markets, Asian companies are willing to offer competitive terms. On a nuclear project, for example, a South Korean group overcame its French competitor by offering more attractive terms.

“The (UAE) leadership is turning eastwards more than before,” said Valérie Marcel of think tank Chatham House. Westerners are truly facing competition when attempting to gain shares in UAE oil fields. Continuing to update technology and stepping away from regional politics will help Western companies gain and maintain shares in the UAE oil industry.


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