Adnoc and Mubadala will co-operate in downstream development projects

Abu Dhabi National Oil Company and the strategic investment firm Mubadala Investment Company will explore downstream investment opportunities across the globe as the state-owned producer expands its liquefied natural gas supply.

Adnoc and Mubadala yesterday signed a framework agreement that also builds on the latter’s diverse portfolio of refining and petrochemicals assets, it said yesterday.

“This agreement is a natural evolution of the close relationship between Adnoc and Mubadala,” said Abdulaziz Alhajri, director of Adnoc’s downstream directorate. “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.”

The announcement is the latest in a string of deals and agreements signed by Adnoc over the first three days of the Abu Dhabi International Petroleum Exhibition and Conference.

On day one, Adnoc signed an agreement with Saudi Aramco, the world’s biggest crude-producing company, to explore investments in natural gas and liquefied natural gas sector as the two look to expand their revenue base.

As part of the latest agreement, Adnoc and Mubadala will explore the potential for the processing of crude oil and other hydrocarbons supplied by Adnoc, as well as potentially using technologies owned by Mubadala with product offtake by other Adnoc companies. This allows the UAE to ensure the long-term security of its oil and gas resources, Adnoc said.

Mubadala, which manages $225 billion in assets, owns stakes in petchems assets as well as international energy companies such as Spanish Cepsa, Austrian OMV, Cosmo Oil, Pakistan’s Parco, Canada’s Nova Chemicals and Austria’s Borealis.

Adnoc and Mubadala have also tied up on investments in the past. Borealis, 67 per cent owned by Mubadala, owns a 40 per cent share in the capital’s biggest petchems complex, Borouge. In February this year, Adnoc awarded Cepsa a 20 per cent stake in the Sarb and Umm Lulu offshore concession. In May, it signed a project development deal with Cepsa for a new linear alkyl benzene facility within Adnoc’s complex in Ruwais.

The state oil company, which also awarded OMV a 20 per cent stake in the Sarb and Umm Lulu offshore concession, is pursuing its downstream strategy that includes investing Dh165bn downstream programme concentrated with partners in Ruwais over the next five years.

Separately, Adnoc has extended its gas supply agreement with subsidiary Adnoc LNG until 2040, replacing an earlier deal expiring in the first quarter of 2019.

The Adnoc unit signed seven agreements for the sale of more than 4.2 million tonnes of LNG annually with a growing emphasis on locking in shorter-term contracts to respond to growing demand for the cleaner fuel.

“The LNG market is projected to grow at a robust pace, fuelled by demand from Asia and developing countries who want access to a clean and affordable source of energy,” said Mr Alhajri.

“Adnoc LNG is well positioned to leverage this opportunity and is now modernising its commercial approach to transition from a single-customer to a multi-customer business that includes a number of global utilities as well as portfolio players and traders.”

The agreements follow Adnoc’s recent announcement of gas discoveries of up to 15 trillion cubic feet, an addition of 7.1 per cent to existing reserves.

The UAE, which had 3.1 per cent of global proven gas reserves before the discoveries, is expected to become a net gas exporter and develop LNG export capabilities.

The contracts would cover supply of LNG on a midterm basis starting from April 2019, and have been signed with several key global buyers, including Japan’s Jera, Adnoc said.

Jera, which is the biggest buyer from Adnoc LNG, in August announced plans to purchase eight cargoes annually for a period of three years beginning in April 2019. Discussions are under way with other potential customers to cater to mid and long-term contracts, the company added.

Adnoc LNG is a joint venture between Adnoc, which holds the majority 70 per cent share, with the remainder shared between Japan’s Mitsui, which has a 15 per cent stake, BP, with 10 per cent and France’s Total with 5 per cent interest. The LNG arm, based offshore on Das Island, has been operational since 1977.