ADNOC announced two major new gas deals with Italian oil and gas major ENI and French compatriot Total. The main focus of these two deals is to utilize and access the vast unconventional gas reserves of the country. At the same time, ADNOC CEO Sultan Al Jaber indicated that his company is seeking new investment opportunities in LNG. The main driver here will be to diversify not only the company’s portfolio and capabilities, but also to utilize its national and international subsidiaries. Sultan indicated that there is a need for a more international strategy in the downstream sector. “There will be more initiative (gas) plans,” Al-Jaber said in an interview in Abu Dhabi. “We are not going to expand beyond our borders in upstream. We don’t need to. We have access to vast, vast oil and gas reserves,” he said. The main international focus will be downstream, focusing on Asia. This approach will likely include cooperating with its main Arab compatriot, Saudi Aramco. The two giants are already stepping up cooperation in India and other Asian targets. This week, Aramco and ADNOC have signed a framework agreement targeting investments in natural gas and LNG. As Sultan Al Jaber stated “the combination of Aramco and ADNOC will set up a powerhouse of unknown order” in the market, possibly changing part of the total environment for IOCs in the future. The energy cooperation between the two NOCs is partly based on the direct links between Saudi Crown Prince Mohammed bin Salman and Abu Dhabi’s Crown Prince Mohammed bin Zayed, as the two are coordinating on a long list of international and regional projects.
With Total, ADNOC has signed an agreement granting the French major a 40 percent stake in the Ruwais Diyab unconventional gas concession. The latter has been set a production target of 1 Bcf per day by 2030. A more interesting deal has been signed with Italian IOC ENI, granting the Italians a 25 percent stake in an offshore ultra-sour gas project. The ultimate goal of all these gas agreements is to achieve gas self-sufficiency and possibly become a net gas exporter. These options are feasible, as the UAE holds the seventh-largest proven reserves of natural gas in the world, at slightly more than 215 trillion cubic feet, according to the U.S. Department of Energy. At present, the UAE is still a net gas importer as demand grew in 2008 to levels that internal production could not supply. This spike in demand comes from both electricity production and increased oil production (which requires gas injection).
While gas production is set to be a central focus for Abu Dhabi, oil has not been forgotten. At ADIPEC, ADNOC stated that it will invest $1.4 billion in upgrading and expanding its Bu Hasa field, targeting a production increase of 100,000 bpd in order to hit 650,000 bpd by 2020. The EPC contract was awarded to Spanish company Tecnicas Reunidas and is expected to take around 39 months to be implemented. ADNOC has officially set an overall oil production capacity target of 4 million bpd by 2020 and 5 million bpd by 2030.
ADNOC has also signed a framework agreement with UAE investment company Mubadala Investment, one of the major SWFs, to explore downstream investment opportunities across the globe. ADNOC downstream director Abdulaziz Al Hajri stated that “this agreement is a natural evolution of the close relationship between ADNOC and Mubadala…It will ensure that, in partnership, we continue to maximise value from our hydrocarbon resources, in line with the leadership’s directives of stretching the value of every barrel of oil we produce.” ADNOC and Mubadala have agreed that there is huge potential for the processing of crude oil and other hydrocarbons supplied by ADNOC, as well as potentially utilising technologies owned by Mubadala with product offtake by other ADNOC companies.
The general view at ADIPEC 2018, one of the world’s largest oil and gas conferences and exhibitions, is that NOCs are stepping up their rivalry with IOCs in the latter’s main markets. Investments by ADNOC, Aramco and others, are openly targeting new marketshare in downstream and gas sectors. The combination of Aramco and ADNOC should not be underestimated. A fully integrated strategy could bring two of OPEC’s leading producers together, able to dwarf investments and production in upstream and downstream from the likes of Shell, BP and ExxonMobil.
By Verocy for Oilprice.com