Adnoc's logistics unit seeks smart growth opportunities after shipping joint venture

AW Shipping may also 'pursue other market opportunities' to deliver maximum fleet efficiency

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Adnoc Logistics and Services is evaluating “smart growth” opportunities and joint ventures, as it looks to grow its fleet capacity to meet demand.

The Adnoc subsidiary, which will form a shipping joint venture with China's Wanhua Chemical Group, plans to add ten liquefied petroleum gas and long-range product tankers to its portfolio, chief executive Capt Abdulkareem Al Masabi told The National.

“We are working with our partners to build up some [joint ventures] where we see very smart, win-win situations for both parties,” he said.

“Our crude capacity expansion is continuing and will continue. And that is all actually under plan. We have acquired ultra-maxes this year. There’s no stopping our growth plans.”

The new company, AW Shipping, has been incorporated at the Abu Dhabi Global Market and will be responsible for transporting LPG and other products produced by Adnoc and other international suppliers.

The tankers will deliver the products to manufacturing bases in China and other countries.

AW Shipping may also “pursue other market opportunities” to deliver maximum fleet efficiency, the company said.

“The [joint venture] further solidifies Adnoc L&S’ position as the largest, fully integrated logistics and shipping company in the UAE and paves the way for the transportation of greater LPG volumes to China, in line with market demand,” said Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and Adnoc group chief executive.

Adnoc L&S, which was formed after the merger of three Adnoc units in 2016, plans to add more than 25 vessels over the next five years.

The coronavirus pandemic, which disrupted supply chains and proved debilitating for the oil and gas industry, has had little impact on the company’s operations, Capt Al Masabi said.

“Our tanker fleet has outperformed, as you would imagine, because of the pandemic, the contango situation, oversupply and low demand.”

Adnoc Logistics and Services vessel. courtesy: Adnoc

The company, which also covers marine services, offshore logistics and onshore activities, had “zero downtime” across these segments in the last four months, he said.

Adnoc L&S plans to hasten its digital transformation to support vessels and crew stranded at sea because of the pandemic.

“Through[out] the lockdown, our crew have been aboard our vessels for months because they could not leave and because of the flight embargo across the world,” Capt Al Masabi said.

“But looking at technology, digitisation, I think this is the most important element that we have all learnt, that we need to put more effort into executing it as soon as possible.”

The company’s joint venture with Wanhua comes after a 10-year sales agreement with the group for the supply of LPG in 2018.

LPG, a refined product, is in high demand in Asia, mainly as a cooking fuel stored in cylinders for stoves as well as a propellant, refrigerant, vehicle fuel and feedstock for the petrochemicals industry.

National oil companies such as Adnoc have begun negotiating and signing long-term contracts for products with buyers in East Asia as they look to secure market share and to focus more on downstream operations.

Adnoc produced about 10.8 million tonnes of LPG last year. The company is expanding its refining and chemical capabilities through an investment of up to $45 billion (Dh165.3bn) with partners, including plans to build the world’s largest integrated refinery by 2025.

Adnoc L&S, which carried out tests on biofuel as a bunkering fuel earlier this year, is exploring options to scale up its use.

“We are analysing how we could [try it] out on a much larger fleet. As you know, such fuel does not exist in huge quantities,” said Capt Al Masabi.

“To realise it on different types of engines does take time. But I have to say that the first trial was very successful.”