Abu Dhabi Global Market (ADGM) has recently announced that it has entered into an agreement with the Supreme Petroleum Council in Abu Dhabi (the SPC), pursuant to which ADGM will be able to grant entities that are incorporated in ADGM a licence to carry out onshore and offshore oil field and facilities services (the Oil and Gas Services Activity).
Prior to such agreement, the Oil and Gas Services Activity was reserved for companies registered “on-shore” in the United Arab Emirates (UAE) outside of a free zone, whereas companies registered in a free zone, such as ADGM, were precluded from carrying out certain types of Oil and Gas Services Activity in Abu Dhabi. The announcement from ADGM represents an encouraging change to the way companies can now structure themselves for purposes of conducting the Oil and Gas Services Activity in Abu Dhabi. For example, entities incorporated in ADGM will now be able to register as a supplier of products to Abu Dhabi National Oil Company (ADNOC). Previously, such registration was only possible for on-shore entities, which meant that a foreign company would need to align its corporate and operational structure with the current foreign ownership restrictions in the UAE. A discussion of such restrictions is beyond the scope of discussion of this article, but it should be noted that such restrictions often lead to an increase of operational costs for entities conducting services in the UAE.
Notwithstanding the announcement and the proposed changes, any entity that conducts the Oil and Gas Services Activity will need to obtain approval from the SPC, regardless of where it is incorporated.
By way of background, the SPC has an overarching authority to oversee the petroleum industry in the Emirate of Abu Dhabi. It is responsible for promulgating and effecting petroleum-related policies, objectives and activities in the Emirate of Abu Dhabi. ADGM is a broad-based international financial centre for local, regional and international institutions, situated on Al Maryah Island in the Emirate of Abu Dhabi. ADGM is an English Law jurisdiction and has an English speaking legal and regulatory system with access to its own common law court system. There are currently no foreign ownership restrictions, corporate, capital gains or withholding taxes in ADGM. This makes ADGM an attractive jurisdiction to implement creative corporate structures involving foreign investors.
Companies carrying out any aspect of the Oil and Gas Services Activity should consider and review their current corporate and operational structure in the UAE, to ascertain how they may benefit from the proposed changes announced by ADGM.