Adnoc closes refining deal with Eni and OMV and establishes trading joint venture

Adnoc plans to invest Dh165bn with partners to build the world’s largest integrated refining and chemicals complex by 2025. Victor Besa / The National

Abu Dhabi National Oil Company (Adnoc) has completed partnership agreements with Eni and OMV which will see them take stakes of 20 and 15 per cent, respectively, in its refining unit. It has also established a trading joint venture with the two energy companies.

Adnoc did not disclose the value of the transaction, though an earlier estimate had placed it at $5.8 billion (Dh21.3bn).

The partners' new trading venture, Adnoc Global Trading, will focus on the direct sale of products from the state-oil company's refinery at Ruwais to customers in Asia. It will be based at the Abu Dhabi Global Market.

Physical and derivative trading is expected to begin in 2020, following completion of all necessary processes, Adnoc said.

The Italian and Austrian energy companies have the same shareholdings in the trading venture as in Adnoc Refining.

The UAE, which accounts for 4 per cent of global crude production, much of it from fields owned and operated by Adnoc, wants to double refining and triple chemical capacity by 2025. The Abu Dhabi major unveiled plans to invest Dh165bn with partners across the downstream value chain, amid ambitions to build the world’s largest integrated refining and chemicals complex in the emirate’s western region of Ruwais by 2025.

Adnoc Refining has a total capacity of 922,000 barrels per day (bpd) and is the world’s fourth-biggest single-site refinery. After the development of a new 600,000 bpd refinery, the unit’s capacity is expected to increase to process crude and condensate amounting to 1.5 million bpd, rivaling India’s 1.24 million bpd at the Jamnagar refinery, which is currently the world’s biggest.

The Abu Dhabi company will retain a 65 per cent stake in Adnoc Refining, which has an enterprise valuation of $19.3 billion (Dh71bn).

In April last year, Adnoc announced its intention to set up a non-speculative trading unit as the company looks to expand revenue streams and derive greater value from the sale of crude and products. Other state-owned firms in the region have adopted a similar strategy.

Saudi Aramco set up a unit to trade in refined, liquid chemical and polymer products in 2012. Iraq’s State Marketing of Oil has a Dubai-based joint venture with Russia’s Lukoil to sell its oil. Oman Oil Company also has its own unit, Oman Trading International, which trades in crude products and liquefied natural gas.

Adnoc Refining, which has a product range that includes liquefied petroleum gas, naphtha, gasoline, jet fuel, gas oil, base oils, fuel oil and petrochemical feedstock such as propylene, expects to achieve better optimisation of systems and better management of international product flows following the establishment of the trading unit.

The transaction is the second for Eni this year with the Abu Dhabi major following the award of two offshore exploration blocks in Adnoc's first ever competitive bid round. The Italian major, in consortium with Thailand's PTT Exploration and Production Public Company, paid Dh844 million for exploration and appraisal of the concessions.