Special Interview: Oil Development Business in the UAE | Integrated Report(COSMO REPORT) | Reports and Presentation

Longstanding relationship between Cosmo and the UAE

Sakai: As CEO of Cosmo Energy Exploration & Production Co., Ltd., I am extremely grateful to our partner, Abu Dhabi National Oil Company (ADNOC), which has been very supportive of our business. I have been with the Cosmo Energy Group for 32 years, and was involved in the upstream sector from 2015 to 2019, including two years at Abu Dhabi Oil Co., Ltd. (ADOC), where I contributed to the establishment of the Hail Oil Field.
Operating in the UAE, where we have highly competitive oil fields, represents a key strategic advantage for our business. In our Abu Dhabi operations, a major strength I see is that two of our group companies, ADOC and United Petroleum Development Co., Ltd. (UPD), operate oil fields as designated operators. We have been engaged in safe and stable operations for many years through a close relationship with Abu Dhabi National Oil Company (ADNOC). As president, I would like to follow in the footsteps of my predecessors and make use of both our human resources and physical assets so that we can further grow our Oil Exploration & Production Business in the UAE.

Mr. Al Kaabi: Thank you. Let me start by highlighting the excellent relationship between the Cosmo Energy Group and ADNOC through the years, as well as the strong government-to-government relationship between Japan and the UAE. We are looking forward to expanding our collaboration and identifying more opportunities to work together.
Historically, Japanese energy companies have been trusted partners to Abu Dhabi’s oil and gas industry, and our energy industry in general, since the late 1960s and early 70s. Back then, Abu Dhabi opened up oil concession bidding to Japan. Maruzen Oil and Daikyo Oil (both companies are currently Cosmo Energy Holdings), as well as Nippon Mining Co., Ltd. (currently ENEOS Holdings Co., Ltd.) jointly bid and were awarded oil concessions. In 1967, a concession agreement on the exploration and development of the Mubarraz Oil Field in Abu Dhabi was signed. For over half a century, you have consistently operated in the field with stability and reliability. Also, you acquired additional oil fields in Abu Dhabi, including the Al Bunduq and Hail oil fields. We are very proud of our shared legacy of building excellent energy projects in the region, and we look forward to continuing these efforts going forward.

Sakai: I share the same feeling. In addition to ADOC and UPD being active in the UAE, we also operate Offshore Block 4, which is currently in the exploration stage. The block benefits from lower operating unit costs as it is located in the shallow waters of the Arabian Gulf. In addition, the block lies adjacent to the Mubarraz Oil Field. While our operations in the area have centered around oil exploration to date, in the context of the transition toward decarbonization, LNG has received renewed attention as a fossil fuel. In light of this, we would like to explore the possibility of entering this field while remaining mindful of existing projects. Of course, we need to remain aware of existing projects, but with ADOC and UPD, we still see an upside in this business. Therefore, we would like to advance these projects going forward.

Mr. Al Kaabi: As you highlighted, we have a longstanding partnership with the Cosmo Energy Group. We are working constructively to maximize the value we provide and are focusing primarily on efficiency, low-cost production, and capability development. Looking at UPD and the Mubarraz Oil Field, I am really impressed with the capability that Japanese companies bring, especially in relation to the Hail Oil Field. They develop and implement new oil schemes that ensure maximum recovery for both ADNOC and Cosmo.
In the past, sour gas¹ injection was utilized to enhance oil recovery, which involved complicated processes and development schemes. In 2001, ADOC became the first company in the Middle East to achieve zero flaring² by recovering sour gas generated in tandem with oil production and injecting it back into underground oil reservoirs. This technology promotes both environmental conservation and improved oil recovery rates. As a national oil company, we are glad to see a strong operator like you operating so excellently in this challenging environment. We are blessed with the capability you brought in, and we are keen to see more such capabilities being deployed in Abu Dhabi to ensure maximum recovery, high profitability, and best-in-class operational efficiency. I have no doubt that with your commitment and technical strength, you will continue to add value to the partnership between Abu Dhabi and the Cosmo Energy Group.

Sour gas: Gas containing toxic hydrogen sulfide and carbon dioxide generated during oil production. Any gas that cannot be reinjected into underground oil reservoirs is subject to flaring.
Zero-flaring: The practice of reinjecting nearly all the gas generated during oil production in order to minimize the gas flares that occur during flaring

Outside perspective on Cosmo’s future path

Sakai: I recall that you formerly served as an outside director at Cosmo Energy Holdings. Looking back and comparing that time to the current state of our group, what are some of the changes that you feel we have gone through?

Mr. Al Kaabi: Yes, I served as a board member, and I have a great attachment to the Cosmo Energy Group. At that time, it was very clear that the leadership and the company was focusing primarily on business diversification and positioning the company strongly in the new energy landscape. There was a strong focus on sustainability, innovation, and diversification, as well as rebalancing the portfolio. I think your group has done a great job in executing that strategy. However, I understand now that there have been some enhancements to that strategy. While your group maintains its focus on sustainability, new energies, and business diversification, you are also prioritizing efficiency and maximizing upstream value. Comparing the Cosmo of six years ago to now, I think the company is on the right trajectory, and I strongly encourage you to continue pursuing your diversification, innovation, and sustainability agenda.
At the same time, I also think there is significant value that has yet to be fully realized in your integrated downstream position in Japan. As with the upstream, I trust that downstream businesses are receiving comparable strategic attention. That is also going to be an important part of your strategy to ensure that your company remains resilient, profitable, and strong going forward.
Your group’s Vision 2030 has three pillars: bolster the green electricity supply chain; expand next-generation energy; strengthen competitiveness of the Oil Business and pursue low carbonization. These pillars are very strong and should position the company well for the next chapter of its growth. I think you have the right technologies and growth aspirations, and I have full confidence in you to deliver value for shareholders from these three key pillars.

Sakai: Thank you. As you mentioned, I think one of our major strengths lies in the fact that we have a vertical business structure that encompasses everything from crude oil development to marketing. In recent years, the Japanese market has stabilized, allowing us to secure healthy margins. This has in turn led to improvements in our financial position. In terms of our electric power business, we are focused on expanding our efforts in renewable energy, including wind power generation. We are committed to growing our presence in next-generation energy and renewables so that we are prepared for whatever forms of energy may emerge in the future.

Strengthening our partnership and future hopes for the Cosmo Energy Group

Sakai: The fact that we have been able to operate in the UAE for so many years lies in the strong trust in our technical capabilities and the solid partnerships we have built. I would like to further strengthen our relationship with the UAE and deepen our mutual understanding—not only on the business front, but on a cultural level as well.

Mr. Al Kaabi: I feel the same. I would like to thank you for your commitment to the UAE, and look forward to exploring ways to further collaborate going forward. I absolutely have no doubt that with your commitment and technical strength, you will continue to bring in more value to this partnership between ADNOC and the Cosmo Energy Group.