Adnoc signs energy deals as UAE agrees $23bn investment in Indonesia

The UAE is set to invest in the South-east Asian nation through a sovereign wealth fund being created by its President Joko Widodo

ABU DHABI, UNITED ARAB EMIRATES - January 12, 2020: HE Dr Sultan Ahmed Al Jaber, UAE Minister of State, Chairman of Masdar and CEO of ADNOC Group (R), greets HE Joko Widodo, President of Indonesia (L), during a reception at Qasr Al Watan.

( Hamad Al Kaabi / Ministry of Presidential Affairs )​
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Abu Dhabi National Oil Company signed a preliminary agreement with Indonesia's Pertamina and Chandra Asri to explore the possibility of developing a crude-to-petrochemicals complex in the South East Asian nation in addition to potentially supplying naphtha, as the UAE agrees to invest $23 billion (Dh 83.68bn) in the country through a sovereign wealth fund being created by its President Joko Widodo.

The investment agreement by Adnoc is part of 11 business deals worth around 314.9 trillion Indonesian rupiah ($23bn), President Widodo announced on Twitter after he met Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces at the Qasr Al Watan Palace.

The UAE, the second-biggest Arab economy, plans to invest in Indonesia's infrastructure and energy sectors, including projects such as the development of a new capital in Indonesia, Bloomberg reported citing a statement by the Indonesian cabinet secretariat on Monday. Japan's SoftBank Group and the US International Development Finance Corporation are also eyeing taking part in the fund which is key in helping Indonesia meet its ambitious infrastructure programme, which requires more than $400bn of investment over the next five years.

The latest round of deals between the UAE and Indonesian firms follows $10bn to $15bn worth of agreements signed by companies such as Adnoc, Mubadala Investment Company and port operator DP World during a visit by Sheikh Mohamed to Jakarta last year.

Apart from the potential crude-to-petrochemicals plant in Balongan region, Adnoc also signed a sales agreement with state-controlled oil and gas company, Pertamina for up to 528,000 MT of liquefied natural gas by the end of 2020. It also signed a preliminary agreement with petrochemicals firm Chandra Asri to explore potential supply of naphtha that would be utilised as feedstock for a current and potential new cracker complex in Indonesia.

“The agreements signed with Pertamina and Chandra Asri will potentially help Adnoc to secure additional in-market presence in one of South-east Asia’s fastest-growing economies, enabling new domestic value-creation opportunities across the hydrocarbon chain,” Dr Sultan Al Jaber, UAE Minister of State and Adnoc group chief executive, said.

“This announcement is a testament to the success of Adnoc’s international partnership strategy, our ability to consistently deliver innovative value-creation opportunities and the UAE’s strong ties with the republic of Indonesia.”

Adnoc is pursuing its ambitious vision and 2030 strategy to grow its presence across the energy value chain and secure greater market access for its products by forging partnerships. The UAE accounts for 4 per cent of global crude production, much of it from fields owned and operated by Adnoc in Abu Dhabi. The national oil company is on track to reach 4 million barrels per day of production capacity this year as it looks to increase output capacity to 5 million bpd over the next decade.

Adnoc is also looking to expand its downstream business with an intention to secure markets for its core hydrocarbon products and capture greater margins throughout the value chain. As well as developing and expanding its domestic downstream operations, the company is also exploring a number of targeted international investment opportunities to support its refining and petrochemicals growth ambitions, Adnoc said on Tuesday.

The potential supply agreement with Chandra Asri will further expand Adnoc’s reach in Indonesia and is expected to help lay the groundwork for other potential areas of collaboration between the two companies, it added.

The potential crude-to-petrochemicals complex in Indonesia would also build upon the ambitions outlined in the comprehensive framework agreement signed by Adnoc and Pertamina in 2019, as it helps accelerating Indonesia’s path towards petrochemical self-sufficiency.

“The agreements with Adnoc will …. [help in] realising Indonesia’s energy security in a challenging and complex environment,” said Nicke Widyawati, Pertamina president and chief executive.

“We expect that both the potential refinery development at Balongan and the direct LPG supply will allow us to optimise Indonesia’s oil and gas value chain, better serve the domestic market through our vast distribution networks across the whole archipelago and access new opportunities to meet growing global demand for petrochemical products.”

Indonesia is restructuring its energy system to meet the requirements of environmental sustainability, President Widodo said in Abu Dhabi during a speech at World Future Energy Summit.

The South East Asian country also implemented a mandatory bio-diesel requirement called B20, to rein in its fuel bill and reduce Carbon Dioxide (CO2) emissions, he added.

“Our diesel must contain 20 per cent bio-diesel. We have calculated this policy not only saves us $3.4bn in fuel imports but also reduces 849m tonnes of CO2 emissions. We will increase bio-diesel requirement to 30 this year, which will further save fuel imports and further reduce greenhouse gas emissions.”

Indonesia is building a new capital city, which is expected to have a population of 6 to 7 million people, the president said.

“The new capital will be the showcase of the most advanced technology. It will be best in energy efficiency and environmentally friendly. We don’t want to build a smart administrative capital but a smart metropolis.”