BP’s exclusion from bidding to renew its concession thought to be reprisal for British criticism of crackdown on Islamist groups
One of BP’s longest-running energy concessions is threatening to become a high-profile victim of tensions between the United Arab Emirates and Britain over criticism of the Middle East state’s crackdown on Islamist extremist groups.
BP was first given a stake in a vast onshore oil field in Abu Dhabi back in 1939, but the concession comes up for renewal in 2014 and BP has been excluded from the bidding list.
The UAE is one of the top five oil exporters in the world and Abu Dhabi is the headquarters for BP’s entire exploration and production operation across the Middle East – the birth place a century ago of the business as the Anglo-Persian Oil Company.
BP said “discussions are still continuing” with the UAE authorities but its exclusion from the bid is a major blow. The company is already in the middle of a row with Azerbaijan over falling output there, and has been hit by a series of serious problems in recent years, most notably the Deepwater Horizon oil spill in the Gulf of Mexico.
The oil major is privately said to be still hopeful the British government can sweet-talk the UAE into changing its mind at a time when its chief rivals, Royal Dutch Shell, ExxonMobil and others have been accepted as prequalified to bid.
UAE officials have also accepted privately that BP’s failure to make the list of bidders is a problem associated with the UK government rather than the company. Oil analysts in London, who preferred not to be named, said it was generally accepted that BP was the victim of a wider political row.
The UAE has indicated that it is still to make a final decision on the issue, giving it leverage to encourage the UK government to dissuade political commentators in Britain from giving what it perceives as support to Islamist groups such as al-Islah.
According to Human Rights Watch, the group – whose name translates as Reform and Social Guidance – is a “non-violent political assocation advocating greater adherence to Islamic precepts”.
BP holds a 9.5% holding in the 1.4m barrels-a-day concession alongside four western oil majors and the local state-owned group Abu Dhabi National Oil Company.
The loss of its interests would deprive the company of 125,000 barrels a day, which is around 3.5% of its total global production.
This is a significant amount given that BP is struggling to keep its volumes from falling, especially at a time when it is in the middle of selling its 50% stake in TNK-BP, its highly productive Russian operation.
The financial loss from Abu Dhabi, however, would be less pronounced as the company is only paid around $1 for each barrel produced under the terms of the concession, which is structured as a “contractor fee”.
Abu Dhabi is one of the few Gulf states that allow western companies to explore for oil, and BP’s exit would be a blow to the company’s image as a blue-chip operator in demand all over the world. BP does not have any business in other major Middle East producers such as Saudi Arabia, but it does have oil interests in Iraq. It also has gas production in Oman and is developing gas fields in Sharjah.