Ed's comment: UAE reinforces ties with two giants

Abu Dhabi's oil diplomacy with China and India is a masterstroke that goes a long way in securing its energy industry

Indrajit Sen is the deputy editor of Oil & Gas Middle East magazine.
Indrajit Sen is the deputy editor of Oil & Gas Middle East magazine.

Respecting the fact that the world order has been changing steadily, and considering the fact that long-term partnerships over spot market deals would guarantee prosperity for the oil-reliant UAE, the leaders in Abu Dhabi seem to have embarked on a robust oil diplomacy.

This has been reflected in the visit of a large UAE delegation led by His Highness Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces to New Delhi in January.

HH Sheikh Mohammed’s visit to Delhi as the chief guest for India’s Republic Day celebrations – an honour which the UAE reciprocated by illuminating the Burj Khalifa and the ADNOC Tower in colours of the Indian flag on January 26th – had tremendous symbolic value.

But beyond the warm embrace between the UAE leader and Indian Prime Minister Narendra Modi and the marching of the UAE military contingent at India’s Republic Day parade ceremony, was the fact that the occasion was marked by the signing of 14 MoUs – chief among those the strategic deal between ADNOC and the Indian Strategic Petroleum Reserves Ltd (ISPRL).

As part of the agreement, which was a formalisation of the deal that had already been struck between the two sides during HH Sheikh Mohammed’s previous visit to India less than a year back, ADNOC will have access to ISPRL’s facility in Mangalore to store nearly 6mn barrels of its crude oil, in return allowing India to consume two-thirds of the reserve oil for free.

The other recent highlight of Abu Dhabi’s oil policy has been manifested in ADNOC completing the 40% of the ADCO onshore concession, earmarked for foreign investments, by awarding 12% to two of China’s energy majors – 8% to CNPC and 4% to CEFC.

While there is no reason to believe that ADNOC selling portions of the ADCO stake to Chinese companies was guided by Abu Dhabi’s strategy of forging close business ties with Beijing, the significant contract nonetheless will cement economic relations as it feeds China’s ambition of making global inroads.

By fostering oil alliances with China and India, the UAE has placed itself in a firm position in the prevalent battle for market share among global oil producers. The need for crude in these two giant nations will only grow each year, with IEA forecasts suggesting India to surpass China within a decade vis-à-vis oil demand.


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