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Cre­at­ing a more valu­able down­stream busi­ness will al­low ADNOC to be­come a more flex­i­ble, re­silient and di­verse global en­ergy com­pany, says Abdulaziz Ab­dulla Alhajri, di­rec­tor, Down­stream Direc­torate, ADNOC

Refining & Petrochemicals Middle East - - CONTENTS - WORDS: MARTIN ME­NACH­ERY

Cre­at­ing a more valu­able down­stream busi­ness will al­low ADNOC to be­come a more flex­i­ble, re­silient and di­verse global en­ergy com­pany, says Abdulaziz Ab­dulla Alhajri, di­rec­tor, Down­stream Direc­torate, ADNOC

Abu Dhabi Na­tional Oil Com­pany – ADNOC – last year an­nounced a $109bn capex pro­gramme to be de­ployed across its en­tire value chain. As part of this pro­gramme, at the Down­stream In­vest­ment Fo­rum, which took place on 13 May 2018 in Abu Dhabi, UAE, ADNOC un­veiled plans to in­vest $45bn along­side part­ners, over the next five years, to be­come a lead­ing global down­stream player, en­abling it to fur­ther stretch the value of ev­ery bar­rel it pro­duces to the ben­e­fit of the com­pany, its part­ners and the UAE.

The un­prece­dented in­vest­ment pro­gramme will un­der­pin a new down­stream strat­egy to sig­nif­i­cantly ex­pand ADNOC’S re­fin­ing and petro­chem­i­cal op­er­a­tions at Ruwais in Abu Dhabi, and un­der­take highly tar­geted over­seas in­vest­ments to se­cure greater mar­ket ac­cess.

Through a com­bined pro­gramme of strate­gic part­ner­ships and in­vest­ment, ADNOC will in­crease its range and vol­ume of high-value down­stream prod­ucts, se­cure bet­ter ac­cess to growth mar­kets around the world and cre­ate a man­u­fac­tur­ing ecosys­tem in Ruwais that will sig­nif­i­cantly stim­u­late in­coun­try value (ICV) cre­ation, pri­vate sec­tor growth and em­ploy­ment. The strat­egy is ex­pected to add more than 15,000 jobs by 2025 and con­tribute an ad­di­tional 1% to GDP per year.

The ex­pe­ri­ence of Abdulaziz Ab­dulla Alhajri, who is di­rec­tor, Down­stream Direc­torate, ADNOC, since May 2016, as CEO of Bor­ouge for al­most a decade and a com­bined 25 years in se­nior man­age­ment roles in ADNOC Group com­pa­nies, could prove cru­cial in mak­ing this strat­egy a re­al­ity.

“ADNOC has al­ways been a long-term, re­li­able sup­plier of crude and we will re­main a ma­jor global pro­ducer of crude and gas. How­ever, we now aim to sig­nif­i­cantly ex­pand our down­stream busi­ness to fur­ther ac­cess the grow­ing mar­kets and global de­mand for re­fined and petro­chem­i­cal prod­ucts,” says Alhajri.

Am­bi­tious down­stream strat­egy

“A ma­jor fo­cus of our down­stream strat­egy will be on in­vest­ing in, and sig­nif­i­cantly ex­pand­ing, our as­sets, ca­pa­bil­i­ties and prod­uct range at Ruwais, trans­form­ing it into one of the world’s largest, fully in­te­grated re­fin­ing and petro­chem­i­cals com­plex, un­der­pinned by a $45bn in­vest­ment pro­gramme,” Alhajri adds.

The ma­jor­ity of the $45bn will be in­vested in the Ruwais In­dus­trial Com­plex, with the am­bi­tion of turn­ing it into the main en­gine of growth for ADNOC’S down­stream strat­egy. The in­vest­ment in Ruwais will op­ti­mise pro­duc­tion and ef­fi­ciency, diver­sify the

breadth of the prod­ucts it pro­duces, and ex­pand its re­fin­ing and petro­chem­i­cals ca­pac­ity and flex­i­bil­ity.

Some of the larger, key projects be­ing un­der­taken un­der the strat­egy in­clude a new mixed cracker and polypropy­lene plant (PP5) at Bor­ouge, and a new re­fin­ery as well as in­vest­ments to op­ti­mise pro­duc­tion, in­clud­ing a Crude Flex­i­bil­ity Project (CFP) to al­low ADNOC to process a wider range of crudes. The in­vest­ment for the $45bn down­stream pro­gramme will be mo­bilised and raised jointly by ADNOC and its strate­gic part­ners.

Key down­stream projects

ADNOC’S main projects – un­der im­ple­men­ta­tion and an­nounced – are the mixed feed cracker, Ruwais De­riv­a­tives Park, Ruwais Con­ver­sion Park, new re­fin­ery, CFP, PP5, Gaso­line and Aro­mat­ics Project (GAP), and Car­bon Black and De­layed Coker Project.

The mixed feed cracker is tar­geted to pro­duce 2.5 mil­lion tonnes per an­num (mtpa) of poly­mers and also max­imise in­te­gra­tion op­por­tu­ni­ties and oper­a­tion flex­i­bil­ity within Bor­ouge 1, 2 and 3, and other ADNOC Group com­pa­nies. It en­ables fo­cus on growth in­dus­tries such as pack­ag­ing, in­fra­struc­ture, en­ergy, mo­bil­ity, agri­cul­ture and health­care ap­pli­ca­tions.

“The project has 1.8mtpa of eth­yl­ene cracker ca­pac­ity, and will pro­duce poly­eth­yl­ene and polypropy­lene as well as other prod­ucts, in­clud­ing bu­ta­di­ene, ben­zene, methyl ter­tiary-butyl ether (MTBE) and py­rol­y­sis gaso­line. In this project, we hope to move to the front-end en­gi­neer­ing and de­sign (FEED) stage in H2-2019,” re­veals Alhajri.

“Ruwais De­riv­a­tives Park will hold sev­eral down­stream projects, util­is­ing pro­duc­tion from the new GAP and mixed feed cracker projects. The park will act as a prime cat­a­lyst for the next stage of petro­chem­i­cal trans­for­ma­tion for ADNOC. Com­pa­nies and part­ners are be­ing in­vited to pro­duce prod­ucts and so­lu­tions, such as the lin­ear alkyl ben­zene (LAB), and we ex­pect to award the FEED con­tract for this by the end of this year.”

“Ruwais Con­ver­sion Park en­ables new busi­ness and in­vest­ments fur­ther down the value chain to con­vert prod­ucts from the de­riv­a­tives park into fur­ther end-prod­ucts, or in­dus­trial prod­ucts. We have been work­ing with in­dus­try spe­cial­ists on the com­pound­ing

“We seek part­ners who can de­liver ac­cess to high growth economies, who can ap­ply the lat­est tech­nol­ogy to up­stream and down­stream op­er­a­tions, and who are fi­nan­cially savvy, in­clud­ing in­ter­na­tional in­sti­tu­tional in­vestors, who can de­ploy long-term cap­i­tal for at­trac­tive sus­tain­able re­turns.” Abdulaziz Ab­dulla Alhajri, di­rec­tor, Down­stream Direc­torate, ADNOC

fa­cil­ity and have re­ceived strong ex­pres­sions of in­ter­est, and ex­pect to an­nounce up­dates in the com­ing months,” Alhajri ex­plains.

The PRE-FEED ten­der for the new ADNOC re­fin­ery will be is­sued shortly. When com­pleted, the new re­fin­ery will dou­ble ADNOC’S ex­ist­ing crude re­fin­ing ca­pac­ity, by adding 600,000 bar­rels per day (bpd) ad­di­tional ca­pac­ity.

CFP will en­able ADNOC Re­fin­ing to process medium sour crude in the new Ruwais Re­fin­ery West Com­plex (RRWC). This project will en­able RRWC to process up to 420,000bpd of Up­per Zakum crude, or sim­i­lar crude types from the mar­ket, al­low­ing ADNOC to ex­tract greater value from its crude re­sources by lib­er­at­ing Mur­ban crude, which com­mands a higher price on global oil mar­kets, to be utilised for ex­port sales.

“Out­put from the project will in­crease our re­fin­ing prod­ucts of liq­ue­fied pe­tro­leum gas (LPG), naph­tha, kerosene (Jet-a1), gas oil, gaso­line com­po­nents, propy­lene and sul­phur, tar­geted for ex­port fuel mar­kets, lo­cal fuel con­sump­tion and raw ma­te­rial for petro­chem­i­cal plants in Ruwais,” ob­serves Alhajri.

In March 2018, the CFP has been awarded to a joint ven­ture led by Sam­sung En­gi­neer­ing. It is cur­rently on the en­gi­neer­ing, pro­cure­ment and con­struc­tion (EPC) stage and due for han­dover by the end of 2022.

The PP5 ad­di­tion to the ex­ist­ing Bor­ouge com­plex aims to add 480 kilo tonnes per an­num (KTA) of poly­mer ma­te­ri­als us­ing sur­plus propy­lene from the ADNOC Re­fin­ing ex­pan­sions. This will in­crease ADNOC’S

poly­mer pro­duc­tion ca­pac­ity to al­most

0.5mtpa by 2021.

This vol­ume will be tar­geted to en­hanc­ing Bor­ouge’s com­pet­i­tive edge and boost its sup­plies in ma­jor Asian mar­kets. Bor­ouge has awarded the EPC con­tract for PP5 to Maire Tec­n­i­mont in July 2018.

“GAP will in­crease gaso­line pro­duc­tion ca­pac­ity for ADNOC Re­fin­ing from 5.4mtpa to 9.6mtpa in ad­di­tion to pro­duc­ing 1.6mtpa of aro­mat­ics (paraxy­lene/ben­zene). This will be achieved by util­is­ing naph­tha from ex­ist­ing ADNOC Re­fin­ing plants in Ruwais. This is to sup­port grow­ing gaso­line/aro­mat­ics de­mand in the lo­cal/ex­port mar­kets,” Alhajri points out.

“The project also aims at max­imis­ing ADNOC’S value from naph­tha by con­vert­ing it into aro­mat­ics. We ex­pect to is­sue the tech­ni­cal EPC bids for the project in the com­ing months and make the fi­nal in­vest­ment de­ci­sion by this year-end, or early 2019.”

“The Car­bon Black and De­layed Coker Project aims at re­duc­ing our en­vi­ron­men­tal im­pact while cre­at­ing value by im­prov­ing re­fin­ery mar­gins. This will be achieved by util­is­ing heavy oils, slurry, residue fluid cat­alytic crack­ing (RFCC) and residues to pro­duce 1,700kta of value prod­ucts (polypropy­lene, gas oil, coke and car­bon black), which will feed into ex­ist­ing ADNOC petro­chem­i­cal plants in Ruwais, and cre­ate new prod­uct lines for lo­cal in­dus­tries (car­bon black and coke),” com­ments Alhajri.

Part­ner­ships with lead­ing or­gan­i­sa­tions

Strate­gic part­ner­ships are at the very heart of ADNOC’S growth strat­egy. ADNOC has a suc­cess­ful track record of long-term, mu­tu­ally ben­e­fi­cial part­ner­ships from its ear­li­est days.

“We will ex­pand our in­ter­na­tional foot­print across the full down­stream value chain, in­clud­ing se­cur­ing ad­di­tional crude re­fin­ing ca­pac­ity in growth mar­kets, and en­hanc­ing our petro­chem­i­cal port­fo­lio to par­tic­i­pate in high-growth, high-mar­gin mar­kets,” Alhajri states.

“Our part­ner­ships bring com­ple­men­tary strengths and ca­pa­bil­i­ties, such as tech­nol­ogy, op­er­a­tional ex­cel­lence, fi­nan­cial ac­u­men and mar­ket ac­cess, al­low­ing us to en­hance in­no­va­tion, re­search and to in­vest to­gether and grow to­gether.”

“We seek part­ners who can de­liver ac­cess to high growth economies, who can ap­ply the lat­est tech­nol­ogy to up­stream and down­stream op­er­a­tions, and who are fi­nan­cially savvy, in­clud­ing in­ter­na­tional in­sti­tu­tional in­vestors, who can de­ploy longterm cap­i­tal for at­trac­tive sus­tain­able re­turns,” men­tions Alhajri.

“To­gether with our joint ven­ture part­ner Bo­re­alis, Bor­ouge is fur­ther in­vest­ing in its plas­tics com­pound­ing ca­pa­bil­i­ties to sup­port our Chi­nese cus­tomers. Bor­ouge’s com­pound­ing man­u­fac­tur­ing plant in Shang­hai, China, started op­er­a­tions in 2010 with a pro­duc­tion ca­pac­ity of 50,000 tonnes per an­num (tpa). By the end of 2015, we had in­creased the pro­duc­tion ca­pac­ity to 90,000tpa.”

“In 2017, we started the sec­ond phase of ex­pan­sion at the plant to in­crease its pro­duc­tion ca­pac­ity to 125,000tpa to meet grow­ing de­mand from China’s au­to­mo­tive in­dus­try,” Alhajri de­clares.

Co-in­vest­ing in Rat­na­giri re­fin­ery

In June 2018, a frame­work agree­ment was signed be­tween ADNOC, Saudi Aramco and a con­sor­tium of three In­dian oil com­pa­nies, to ex­plore a strate­gic part­ner­ship and coin­vest­ment in the de­vel­op­ment of a new $44bn mega re­fin­ery and petro­chem­i­cals com­plex at Rat­na­giri, on In­dia’s west coast.

“The Rat­na­giri re­fin­ery an­nounce­ment should be seen in the wider con­text of our

The PRE-FEED ten­der for the new ADNOC re­fin­ery will be is­sued shortly. When com­pleted, the new re­fin­ery will dou­ble ADNOC’S ex­ist­ing crude re­fin­ing ca­pac­ity, by adding 600,000 bar­rels per day ad­di­tional ca­pac­ity.

broader down­stream strat­egy. By in­vest­ing in this project, we will both se­cure off-take of our crude to a key mar­ket for ADNOC, as well as strengthen ac­cess in one of the world’s largest and fastest grow­ing re­fin­ing and petro­chem­i­cal mar­kets. We will con­sider part­ner­ship op­por­tu­ni­ties that will al­low us to meet our busi­ness growth and in­vest­ment ob­jec­tives,” ex­plains Alhajri.

“By tar­get­ing such strate­gic in­ter­na­tional in­vest­ment op­por­tu­ni­ties and ini­tia­tives, we will en­sure long-term mar­ket ac­cess for our hy­dro­car­bons; en­hance and deepen our global mar­ket­ing and crude/prod­uct place­ment ac­tiv­i­ties, in­clud­ing the de­vel­op­ment of a group-wide and in­te­grated non-spec­u­la­tive trad­ing plat­form; and es­tab­lish se­lect and fo­cused, in­ter­na­tional busi­nesses through new joint ven­tures, part­ner­ships and ac­qui­si­tions.”

In-coun­try value ini­tia­tives

In Jan­uary 2018, ADNOC in­tro­duced a new ICV pro­gramme to in­crease the com­pany’s con­tri­bu­tion to the UAE econ­omy and to strengthen its re­la­tion­ship with the UAE’S pri­vate sec­tor.

“Our goal is to en­cour­age the use of lo­cal goods, ser­vices, man­u­fac­tur­ing and the em­ploy­ment of Emi­ratis in the pri­vate sec­tor, to stim­u­late eco­nomic di­ver­si­fi­ca­tion and growth,” Alhajri re­veals.

All busi­ness part­ner­ships with ADNOC now in­clude an ICV as­sess­ment as part of the ten­der eval­u­a­tion and award process. The $109bn cap­i­tal ex­pen­di­ture pro­gramme, over the next five years, will cre­ate mul­ti­ple op­por­tu­ni­ties for lo­cal com­pa­nies to grow along­side ADNOC.

Health, safety and en­vi­ron­ment (HSE) stan­dards

“We en­sure com­pli­ance with HSE and As­set In­tegrity stan­dards, and em­bed ADNOC Group 100% HSE cul­ture across the down­stream busi­ness. We strive for con­tin­u­ous im­prove­ment in health, safety, en­vi­ron­ment and process safety. We iden­tify op­por­tu­ni­ties to im­prove en­vi­ron­men­tal per­for­mance in terms of flar­ing in­ten­sity, en­ergy ef­fi­ciency and sus­tain­abil­ity mea­sures. We em­bed cli­mate change strat­egy frame­work within ADNOC,” ob­serves Alhajri.

“The down­stream busi­ness is un­doubt­edly a ma­jor fu­ture growth driver for ADNOC. We are fac­ing many chal­lenges, but I am con­fi­dent that with con­tin­ued fo­cus on 100% HSE and our other pri­or­i­ties, we will con­tinue to build mo­men­tum and de­liver con­tin­u­ous suc­cess for the next five years and be­yond,” Alhajri de­clares.

Tal­ent short­age in the re­gional in­dus­try

“Here at ADNOC, we are read­dress­ing the tal­ent chal­lenge by em­brac­ing and lev­er­ag­ing equal­ity, in­clu­sion and di­ver­sity. We have ap­pointed two fe­male CEOS, one of them in down­stream busi­ness,” says Alhajri.

“We have re­vised our re­cruit­ment poli­cies, launched lead­er­ship and skills build­ing train­ing pro­grammes through ADNOC Tech­ni­cal Acad­emy for our bright­est and best Emi­rati work­ers, and we are sup­port­ing STEM ini­tia­tives in our own ADNOC schools to en­cour­age young peo­ple to be­come the sci­en­tists, tech­nol­o­gists, engi­neers and math­e­ma­ti­cians of the fu­ture.”

“We have also cre­ated the ADNOC Fu­ture Lead­ers pro­gramme that will pro­vide our high-per­form­ing young Emi­rati em­ploy­ees with the knowl­edge, skills and ex­pe­ri­ence nec­es­sary to be suc­cess­ful at the high­est lev­els of the or­gan­i­sa­tion,” Alhajri points out.

IMO sul­phur reg­u­la­tion

ADNOC is well-po­si­tioned to ben­e­fit from the IMO 2020 sul­phur reg­u­la­tions, as the staterun com­pany has com­plex re­fin­ing fa­cil­i­ties that can pro­duce cheaper heavy crude, while max­imis­ing out­put of dis­til­lates.

“The Car­bon Black and De­layed Coker Project an­nounced in Q3-2018 will strengthen our abil­ity to mar­ket and sell marine fu­els, fol­low­ing the In­ter­na­tional Marine Or­ga­ni­za­tion’s de­ci­sion to re­duce the sul­phur con­tent in marine fu­els to 0.5% by 2020. Our CFP will be able to process heavy crude to pro­duce high-value prod­ucts. ADNOC will pro­duce zero sul­phur con­tent bunker fu­els by 2020,” con­cludes Alhajri.

In March 2018, ADNOC awarded a Crude Flex­i­bil­ity Project, en­abling ADNOC Re­fin­ing to process medium sour crude in the new Ruwais Re­fin­ery West Com­plex, to a joint ven­ture led by Sam­sung En­gi­neer­ing. The agree­ment was signed by Abdulaziz Alhajri (sit­ting, right), di­rec­tor, Down­stream Direc­torate, ADNOC, and Choi Sung-an (sit­ting, left), CEO, Sam­sung En­gi­neer­ing, in the pres­ence of Dr Sul­tan Ahmed Al Jaber (stand­ing, right), UAE min­is­ter of state and ADNOC Group CEO, and Paik Ungyu, min­is­ter of trade, in­dus­try and en­ergy, Repub­lic of Korea.

A ma­jor fo­cus of ADNOC’S down­stream strat­egy will be on in­vest­ing in, and sig­nif­i­cantly ex­pand­ing, its as­sets, ca­pa­bil­i­ties and prod­uct range at Ruwais, trans­form­ing it into one of the world’s largest, fully in­te­grated re­fin­ing and petro­chem­i­cals com­plex.

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