Each party has the right to receive a proportionate share in production. Each party is responsible for the payment of the applicable income tax and royalty on its share. In accordance with the OPEC Formula, the rate of income tax applicable is 85 percent and the royalty is 20 percent to be expended(i.e., to be considered as one of the expenditures of the chargeable party and to be deducted from its gross revenue to determine its net income) The agreement also regulates the technical assistance provided by the parties to the operating company-to avoid instances, as in the past, when almost all the seconders come from one shareholder. It also provides for the creation of advisory committees and for the procedures and schedules for the preparation of operating and capital budgets. The agreement is governed by Abu Dhabi law and disputes are settled by arbitration in Abu Dhabi in accordance with International Chamber of Commerce(ICC) rules and regulations. An annex containing detailed accounting and financial procedures is attached to prevent ambiguities and disputes. Another feature of the implementing agreement is the establishment of different advisory committees t the Board, composed of the representatives of the participants. Initially four such committees were established: the Technical Committee; the Finance Committee; the Contracts and Projects Committee; and the Supply Coordination Committee. ADNOC is involved in the operations of ADMA-oPCO through: its Arab secondees and employees who are working in the company alongside non-Arab foreign secondees and employees nical, akin and policy the these f the The of oil has the pare agree oint s o has in THE ORGANIZATIONAL STRUCTURE oF THE ABU DHABI OIL INDUSTRY Therefore, the implementing agreements discussed above have been satisfactory to all parties concerned and have been realized without any serious difficulties.
The government of Abu Dhabi feels that through these agreements and arrangements it has accomplished its basic objectives: effective control of the production phase of the industry; real participation in the decision-making process; and gaining experience and training for its nationals while securing the contribution of knowledge and expertise from foreign partners. This why, at present, Abu Dhabi’s government appears to be content with the 60 percent participation arrangement and has not been inclined to follow the trend of taking over major operating companies in their entirety, as in Kuwait, Qatar and Saudi Arabia. Developments beyond the Scope of the Major Concessions: ADNOC’s role in exploration and production also involves the development of certain oil fields separately, outside the scope of the operations of the major operating companies. The fields earmarked for development under this arrangement are all offshore and were originally discovered by ADMA and included in its concession.
The need for ADNOC’s involvement arose as a result of the initial reluctance of the foreign partners in ADMA to join these ventures on an equity basis they delayed development on the grounds that the returns under the participation arrangements were insufficient to meet the relatively high investment required to develop these offshore fields. JODCO agreed to join ADNOC in these ventures(retaining an equity share of 12 percent in some). The arrangements concluded that cover these three fields are as follows: Upper zakum Field and the Formation of zADCo An operating company, ZADCO, was created in 1977 to handle the development of this field. The operating company is equally owned by ADNOC and Total(CFP at the time of ZADCO’s creation).
However, the 50-50 ratio applies only to decisions since Total does not have an equity share . ADNOC initially retained an 88 percent equity interest in venture while JoDCo and continues to hold as equit receiving a similar proportion of production and contributing the same percentage of required of its e early 2005, ADNOC agreed to sell 28 percent interest in this field to the US group ExxonMobil. interest was thus reduced to 60 percent, while retained 12 percent.) Umm Al Dalkh Field and the Creation of UDECO The agreement for the development of Umm Al-Dalk h field w finalized in September 1978. As part of the agreement, ADNOC and JoDCo established a 50-50 joint operating company-Umm Al-Dalkh Development Company(UDECO) to handle management and operational decisions.
JODCO, which holds a 12 percent equity stake in the venture, has the right to lift ll percent of crude production as equity oil and a further 20 percent for a determined period at ADNOC’s standard price, terms and conditions for crude oil sales. Dalma. Satah and Jarnain Fields An agreement was reached in July 1990 between ADNOC and JoDCo for the development of these three offshore fields wh were previously included in the ADMA concession. ADNOC’s Prospecting Licenses: In April 1980 the Executive Council of Abu Dhabi granted ADNO( exclusive rights to the exploration and development of hy in five blocks(two onshore and three offshore) within exp areas that were not covered by any existing petroleum agre h these areas ADNoc has the right to carry out all the operation activities constitut control impo national Dhabi’s first-han resultant increase Explora As men(onshore oil Scent explorat concess oil and In vi the ope about discover operations In 2 of small of Abu Dhabi capacity of at the operate of DNOC handle holds a lift 12 ms and C and which activities contained in its establishing law. The decision of 1980 constituted a major step forward in the state’s efforts to ensure more control over its national oil industry. and was undoubtedly an important milestone in ADNOC’s development It provided the national company with the opportunity to strengthen its grip on Abu Dhabi’s oil industry, consolidate its operations and gain invaluable first-hand experience of exploration and production operations. The resultant exploration program adopted by ADNOC led to a substantial increase in proven oil and gas reserves in the country.