Adnoc and Mubadala sign multibillion dollar agreements in Indonesia

Abu Dhabi companies will explore investments in sectors across the energy value chain in both countries

State-owned Adnoc has been eyeing partnership opportunities with Asian buyers such as China, Japan and now Indonesia. Courtesy of Adnoc

Abu Dhabi National Oil Company and Mubadala signed multi-billion dollar agreements to explore upstream and downstream opportunities with Indonesia as the UAE looks to lock in market share and tap refining opportunities in South-East Asia.

The pacts were signed during a visit by Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, to Jakarta. A $1.2 billion (Dh4.4bn) port and logistics deal involving Dubai ports operator DP World, put the collective value of all the agreements at between $10bn to $15bn, according to state news agency Wam.

Adnoc signed a comprehensive framework with Indonesian state oil producer Pertamina that will include opportunities within refining and petrochemicals, liquefied natural gas, liquefied petroleum gas, aviation fuel and fuel retail in the Southeast Asian nation. They will also explore investments in transportation, trading and storage in the UAE, Indonesia and globally.

The UAE, which accounts for 4 per cent of the world’s crude production, much of it from fields owned and operated by Adnoc, has entered into partnerships with Asian buyers in China, Japan, and now Indonesia. On Monday, the UAE state producer signed an agreement with China National Offshore Oil Corporation to explore opportunities downstream as well as in the purchase and sale of LNG.

Pertamina has six oil refineries in its portfolio with a combined production capacity of 1.1 million barrels per day (bpd). It has also invested in the development of various sources of renewable energy.

"Pertamina plans to develop an additional 1 million bpd of refining capacity through the Refinery Development Master Plan and Grass Root Refineries projects,” said Pertamina president director and chief executive Nicke Widyawati.

"Therefore, partnership with Adnoc will be an important milestone for Pertamina to secure energy supplies from overseas,” he added.

Separately, Mubadala Investment Company and Austria's OMV signed an agreement to explore downstream opportunities with Indonesian entities. Mubadala, which is already active in the Indonesian energy sector, and OMV, in which the Abu Dhabi company holds a 24.9 per cent stake, signed a preliminary agreement with Chandra Asri Petrochemical and Chandra Asri Perkasa.

The deals are expected to boost Indonesia’s energy sector, which has been plagued by a lack of investment and the exit of key players, according to Wood Mackenzie research director Andrew Harwood.

“The NOC, Pertamina, has also been challenged to boost refining capacity. Post-election, President Jokowi’s government is adopting a more welcoming approach to foreign investors, evidenced by the recent decisions on the Abadi LNG project and the Corridor PSC extension,” he said.

Jokowi is the popular name given to Indonesia’s president Joko Widodo, who was present at both signings. Indonesia approved the $15bn Abadi LNG project, with Japan’s Inpex brought on as the main developer, last month. Earlier this week, Indonesia extended US major ConocoPhillips' contract to increase production from its Corridor Block, the country's third-biggest gas-producing concession.

"Indonesia will be keen to leverage its existing relationship with Mubadala, one of the country’s key upstream operators, to attract additional investment in its energy sector,” Mr Harwood added.

Last week, Mubadala Petroleum farmed out stakes in two Indonesian concessions to British energy company Premier Oil.

The deal involved the sale of 20 per cent stakes in both Andaman I and South Andaman on a gross split production sharing contracting basis. Mubadala remains the largest operator of both concessions.

The North Sumatra basin area, where both concessions lie, is a relatively unexplored but tectonically active area off the coast of Indonesia. The acquisition makes Mubadala, which also has a 30 per cent stake in the Andaman II concession operated by Premier Oil, the largest net acreage holder in the area.

“We have been active in Indonesia for over 10 years through our portfolio companies operating across the value chain. We consider Indonesia a strategic market and are confident that this MoU will result in potential opportunities for Mubadala, our portfolio companies and key partners,” said Musabbeh Al Kaabi, chief executive of petroleum and petrochemicals platform at Mubadala said at the latest signing.