UAE oil giant considered buying BP but then felt it wasn’t right fit

Potential ADNOC move swayed by political reasoning, say linked sources

The United Arab Emirates’ state-owned oil company recently considered buying Britain’s BP but the deliberations did not progress beyond preliminary discussions, sources familiar with the matter have said.

Abu Dhabi National Oil Company (ADNOC) ultimately decided BP would not be the right fit for its strategy, three people said. Political considerations also weighed on the potential move, one of the people said.

The £88bn (€103bn) company has underperformed its competitors for years, which investors and analysts say has made the British firm a potential takeover target. US oil giants are in the midst of the industry’s biggest consolidation for decades, but European oil majors have to date not been involved.

Investors have penalised BP’s plan to reduce fossil fuel production and its faster shift towards renewables than rivals such as Shell, Exxon and Chevron. In February 2023, BP rowed back on its more aggressive energy transition plans.

ADNOC, in contrast, has increased oil and gas production capacity and CEO Sultan Ahmed Al-Jaber is seeking to reshape the state giant in the image of a global oil major.

The company, which is not publicly traded, is big enough to consider acquiring the smaller of the oil majors, BP.

ADNOC and BP spoke directly in recent months and ADNOC also sought advice from investment banks on a potential deal, two of the sources said.

The Emirati giant considered all options when looking at BP, including buying a big stake, a fourth source said.

Large companies typically evaluate the market value and strategic worth of rivals for potential acquisitions. BP was one of many companies ADNOC has looked at, the source added.

“It didn’t go far,” they said of the considerations over buying BP.

ADNOC has also looked at other international companies to give it access to a bigger gas and liquefied natural gas (LNG) portfolio, the person added.

ADNOC declined to comment. A BP spokesman and a spokesman for Britain’s business ministry also declined to comment.

BP’s UK shares rose by as much as 2.5pc in early trade yesterday to 533.9 pence per share, their highest level since October, outperforming a 0.8pc rise in the broader FTSE 100 and a 1.3pc rise in competitor Shell. The considerations underscore ADNOC’s ambitions to expand internationally as part of the UAE’s energy transition strategy.

It also highlights BP’s vulnerability as investors question its plans.

ADNOC previously said it is pursuing investment opportunities in areas including renewable energy, gas, petrochemicals and LNG as part of its international expansion. ADNOC sees those sectors as key future growth markets.

ADNOC has been pursuing a series of European assets. Last year it made a non-binding bid of about €11.3bn to acquire German plastics and chemicals maker Covestro. It has also been in talks with Austria’s OMV to create a chemicals giant with combined annual sales of more than $20bn.

In December, it agreed to buy European chemical producer OCI’s stake in ammonia and urea producer Fertiglobe for $3.6bn.