Abu Dhabi awards $3.5bn in contracts to Samsung Engineering to boost refining capabilities

The Abu Dhabi oil major is set to announce its downstream strategy soon

The signing of the two agreements was witnessed by Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, and Paik Ungyu, Minister of Trade, Industry and Energy, Republic of Korea. The agreements were signed by Abdulaziz Alhajri, ADNOC’s Downstream Director, and Choi Sung-An, CEO of Samsung Engineering. Courtesy Adnoc

Abu Dhabi National Oil Company awarded two contracts to South Korea’s Samsung Engineering worth $3.5 billion to help process other crude grades as the company looks to free up its flagship Murban grade for export markets.

The first contract worth $3.1bn will enable Samsung to process 420,000 barrels per day of crude sourced from the offshore Upper Zakum concession, and grades of a similar nature from the market, Adnoc said in a statement. The second $473m contract will recover power and water and is set to generate 230MW electricity and 62,400 cubic metres of water per day by capturing waste heat using closed-cycle power generation technology.

"As Adnoc continues to deliver on its 2030 smart growth strategy, a number of new and exciting opportunities exist across our value chain, particularly in the downstream, which offer the potential to deepen and develop the longstanding relationship between Adnoc and its Korean counterparts,” said Dr Sultan Al Jaber, group chief executive of the Adnoc Group.

The UAE, the fourth-largest oil producer in the Middle East, is set to announce a downstream strategy soon, as it looks to profit more from the sale of products. Abu Dhabi, which produces much of the country’s oil and gas and accounts for 6 per cent of global crude reserves, aims to double refining and triple petrochemical capacities by 2025.

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Murban, the UAE’s flagship crude, has light, sweet properties comparable to tight oil from Eagle Ford in the US and is typically sold at a premium of $3.5 per barrel over the Dubai crude grade, said Iman Nasseri, acting managing director - Middle East at London-based Facts Global Energy. The UAE lowered allocations of Murban by 25 per cent in January in order to comply with the Opec-led restrictions on output to help boost prices and lower inventory levels, following the oil price slump of 2014.

Thailand and Japan are the biggest buyers of Murban crude, with smaller buys from other Asian consumers such as Sri Lanka and Taiwan, said Mr Nasseri.

Murban accounts for 10 per cent of Japan's current import of crude with Asia's second-largest economy importing around 200,000 bpd of Murban last year, with similar volumes bought by Thailand, data from FGE shows.
Mr Nasseri said that the award to the South Korean contractors comes amid plans at the refinery to have capabilities to process heavier, more sulphurous blends such as Upper Zakum.

The engineering, procurement and construction (EPC) work on the Ruwais refinery West complex is set for completion by 2022, the company said in a statement.

The waste heat project, designed to lower the company’s environmental impact is targeting a 2023 completion timeline.

The Abu Dhabi oil major, which in October integrated its refining, transmission and distribution entities under a single brand umbrella as it looks to grow a leaner business model, is also looking to develop a mixed-liquid feedstock naphtha cracker, as well as investments to boost refining capacities.

The UAE’s five-year $109bn spending plan approved last year, includes upstream exploration for unconventional gas reserves, and plans to develop downstream capabilities at home and abroad.

Abu Dhabi’s state oil company is currently engaged in a flurry of upstream activity offshore the emirate, awarding concession stakes to European oil majors such as France’s Total and Italy's Eni as well as exploration and production firms from its traditional market base in Asia.

As Adnoc continues to split the erstwhile Adma-Opco entity while retaining a 60 per cent stake, its engagements with its new partners will look to evolve into possible downstream collaboration.

Total chief executive Patrick Pouyanne, whose company won $1.45bn worth of stakes in the twin oil and gas concessions of Umm Shaif and Nasr as well as Lower Zakum, told The National earlier this month that he was in talks with Adnoc to help the company "expand in the downstream."

Abu Dhabi state fund Mubadala-owned Cepsa, which won a 20 per cent stake offshore last month, is also in the planning phase for a petrochemicals venture to build a linear alkyl benzene complex at Ruwais to be integrated with Adnoc’s refinery facility.

Also known as detergent alkylate, LAB is the most common chemical compound used in the manufacturing of biodegradable household and industrial agents.