Adnoc to invest Dh165bn with partners in downstream

Abu Dhabi National Oil Company will invest Dh165 billion in downstream operations in partnership with global players over the next five years as the company looks to build the world's largest integrated refining and petrochemicals facility, with plans under way to create a manufacturing ecosystem at Ruwais.

State-owned Adnoc will increase its current refining capacity of 922,000 barrels per day – already the world's fourth largest – by the addition of a new 600,000 bpd refinery that will boost its total capacity to process crude and condensate to 1.5 million bpd, making it the largest such facility in the world.

"Given the projected increase in demand for petrochemicals and higher value refined products, we are repositioning Adnoc to become a leading global downstream player. We will invest significantly in Ruwais and open up attractive partnership and co-investment opportunities along our extended value chain," said Dr Sultan Al Jaber, Minister of State and Adnoc Group chief executive.

The UAE accounts for 6 per cent of the global oil production, much of it from Abu Dhabi. Adnoc plans to reposition itself as a downstream player amid rising demand for refined products and chemicals in the growing markets of Asia, where other Arabian Gulf players like Saudi Aramco are considering large-scale refining and chemicals investments. The UAE last year approved a five-year spending plan of Dh400bn to be invested in exploring for the country's sour gas reserves as well as acquiring and developing downstream assets abroad.

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Adnoc's new refinery, which will boost its current capacity by more than 65 per cent by 2025, will add to greater flexibility in refining and processing other grades apart from the UAE's flagship Murban crude. Ruwais' chemicals segment will see a trebling of production capacity from 4.5 million tonnes per annum to 14.4 mtpa by 2025, as plans get under way for the world's largest mixed feed cracker. The complex will also include a 1.6 million tonne per annum facility to produce aromatics.

The downstream development is expected to contribute to one per cent growth per year and create 15,000 jobs by 2025, Dr Al Jaber said at a downstream gathering of global chief executives in Abu Dhabi.

Adnoc would look to develop its new 600,000 bpd refinery as a “merchant or an export refinery” capable of processing other crude grades and driven commercially, said Iman Nasseri, Middle East managing director at Facts Global Energy, who noted the removal of subsidies in Gulf economies had incentivised national oil companies to prioritise profitability.

“When there were subsidies it was not profitable and the companies were often selling the crude into international markets to get the market value,” he said.

“In a way the integration is mainly driven by economies [of scale] and certain projects were only strategic decisions but eventually what we’re seeing today in Abu Dhabi and Aramco is more commercially driven and towards higher profits,” he added

Adnoc’s facilities currently process 10.5 billion standard cubic feet of gas per day and produce some 40 million tonnes annually of refined products, such as granulated urea, liquefied petroleum gas, naphtha, petrol, jet fuel, gas oil and base oils, fuel oil, as well as feedstock for chemicals.

Ruwais, which currently includes two refineries and petchems facilities, owned and operated by Borouge – Adnoc's joint venture with Austria's Borealis – will see development of a six square kilometre derivatives and conversions park that will be integrated with the larger complex.

The park will source feedstock from Adnoc's facilities in Ruwais and will "act as a prime catalyst for the next stage of petrochemical transformation by inviting partners to invest and produce new products and solutions," the company said.

The park is set to produce higher-value chemical products such as packaging materials, coatings, flooring, high voltage insulation and automotive composites.

A conversion park spread over 3.5 square kilometres will also be developed to include industry clusters, making use of derivatives produced in adjoining facilities.

Adnoc would provide “feedstock, utilities, and land” at competitive rates to international players looking to invest in Ruwais, said Adnoc downstream director Abdulaziz Alhajri.

"In a way Ruwais is planned to become the petrochemical and refining equivalent of the Silicon Valley, everything will be there. So this step change in the derivatives will also have another opportunity,” he said

"It’s to create further downstream convergence opportunities. These opportunities will be available for the private sector, for small, medium and large enterprises."

Our legal advisor

Ahmad El Sayed is Senior Associate at Charles Russell Speechlys, a law firm headquartered in London with offices in the UK, Europe, the Middle East and Hong Kong.

Experience: Commercial litigator who has assisted clients with overseas judgments before UAE courts. His specialties are cases related to banking, real estate, shareholder disputes, company liquidations and criminal matters as well as employment related litigation.