Adnoc Gas raises capex to $15 billion on UAE gas demand growth

UAE gas demand is projected to grow 6 per cent annually to 2030, company says

Adnoc Gas has access to 95 per cent of the UAE's natural gas reserves. Photo: Adnoc

Adnoc Gas, the integrated gas processing unit of Adnoc, has boosted its capital expenditure target in response to a projected surge in natural gas demand within the UAE.

The Adnoc subsidiary plans to spend up to $15 billion from 2025 to 2029, an increase from its previous target of $13 billion, the company said in a statement on Monday.

“In the UAE, the annual growth in gas demand to 2030 is expected to be 6 per cent, versus an expected 2 per cent at the time of [Adnoc Gas’s] initial public offering,” the company said.

“This strong increase in demand will be driven by higher economic activity, population growth and industrial expansion, underpinned by AI data centres and the food industry,” it added.

Adnoc Gas plans to expand its business in the UAE by investing in new infrastructure to process more raw gas, while maintaining strict financial discipline and focusing on projects with high returns, Peter van Driel, chief financial officer of Adnoc Gas told reporters.

In the UAE, Adnoc Gas supplies to customers, mostly utilities and industrial companies, through an extensive network of pipelines.

The Abu Dhabi-based company, which has access to 95 per cent of the UAE's natural gas reserves, is looking to boost exports of products such as liquefied natural gas, liquefied petroleum gas and naphtha.

On Monday, Adnoc Gas said it expects to acquire parent company Adnoc’s 60 per cent stake in the Ruwais LNG plant in the second half of 2028 for up to $5 billion.

The project, which is partly owned by international energy companies such as BP, Japan’s Mitsui, Shell and TotalEnergies, will significantly increase Adnoc Gas's LNG production capacity, more than doubling it to about 15 million tonnes per annum.

Around 75 per cent of the project's capacity of 9.6 million tonnes per annum has already been sold to international buyers, the company said.

"We'll probably sell most of the volumes long term, and we could keep a bit of volume for the spot market ... sometimes you can play the market by having cargoes available that attract a premium when the spot market is strong," Mr van Driel said.

Adnoc Gas said it suspended expansion operations at its Das Island LNG export facility, off Abu Dhabi.

The "LNG 2.0" project aimed to reduce greenhouse gas emissions and increase LNG production capacity by 900,000 tonnes per annum by electrifying LNG trains. The Das Island plant currently has an output of about 6 million tonnes per annum, with most of it tied to long-term contracts.

Adnoc Gas planned to replace gas-powered turbines with electric ones, which would reduce fuel consumption and maintenance costs. However, due to space constraints on Das Island, the project was complex and would have required significant downtime, impacting production and revenue, Mr van Driel said.

"We cannot take investment decisions that are economically not sound," he said.

The company reported a net income of $1.24 billion for the third quarter, up from $1.12 billion in the same period a year earlier, Adnoc Gas said in a filing to the Abu Dhabi Securities Exchange, where its shares are traded.

Revenue in the third quarter rose 8 per cent on a year-over-year basis to $6.28 billion, supported by higher sales volumes and improved pricing for export-traded liquids.

“Our Q3 results are a testament to our robust performance while our updated strategy supports future proofing our business, aiming for over 40 per cent Ebitda [earnings before interest, taxes, depreciation, and amortisation] growth by 2029. We’re committed to delivering exceptional shareholder value with our ambitious growth plans and an expected 5 per cent annual dividend increase," said Ahmed Alebri, chief executive of Adnoc Gas.

In the first nine months of this year, Adnoc Gas's net income surged nearly 18 per cent to $3.62 billion, while revenue increased by about 12 per cent to $18.37 billion.

Strong demand

Ruwais LNG, which is considered a low-carbon project due to its use of electric-powered liquefaction trains, helps Adnoc Gas "futureproof" its operations, Mr van Driel said.

Although the market is not currently paying a premium for low-carbon LNG, future buyers, especially in the Far East, are becoming increasingly demanding about the environmental impact of the energy they purchase, the finance head said.

"If you are not able to meet these requirements, you will simply not be able to sell your product."

In the broader market, LNG demand is growing 3 per cent annually, mainly driven by Asia, Mr van Driel said.

"Most of our cargoes are heading east. However, we also have cargos that go to Europe, and that tells you...how well the UAE is positioned. We can really optimise our revenues by deciding to go west or east," he added.