Shell and BP are yet to meet the UAE’s demand for a $2.2bn sign-on fee even though it has been nearly two months after the country put a deadline for the bids on a large oil concession.
Although BP and Shell are bidders for a 40-year contract, there is a standoff over the terms, reported The Wall Street Journal.
Their hesitation to meet the UAE demand indicates they may have to lose a large field in the oil-rich nation.
“The UAE plans to increase overall production capacity by 16% to 3.5 million barrels by 2017.”
Exxon Mobil already left the bidding process following the expiry of its 75-year license in January 2014. In January, Total agreed on a $2.2bn sign-on fee to acquire a 10% interest in a concession.
The UAE demanded the same fee from BP and Shell and gave them a 10-day deadline.
However, BP and Shell, similar to several other oil companies have been hit hard by a decrease in oil prices. As a result, both firms had to cut spending and reduce staff.
The concession, which covers 15 onshore fields, will be overseen by local firm Adco. This concession represents nearly 50% of the UAE’s crude output, reported the publication.
By 2017, the country expects production to reach 1.8 million barrels a day. The UAE plans to increase overall production capacity by 16% to 3.5 million barrels by 2017.