ADNOC’s strategy to spend over $108.9 billion gets state approval

Abu Dhabi’s Supreme Petroleum Council (SPC) on Monday approved ADNOC’s key strategic investments program, according to which the state-owned oil and gas company plans to spend over $108.9 billion over the next five years.

The SPC is the highest governing body of the oil and gas industry in Abu Dhabi. The council formulates, approves and oversees the implementation of Abu Dhabi’s petroleum policy and follows up its implementation across all areas of the petroleum industry to ensure that the set goals are accomplished.

The SPC was presided over by His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces and Vice-Chairman of the SPC.

The approval comes as the oil and gas company expands its 2030 strategy, aimed at unlocking, creating and maximizing value and ensuring smart growth in its upstream, and downstream businesses, while strengthening market access, ADNOC said on Monday.

The SPC approved ADNOC’s plans for capital expenditure of over AED 400 billion ($108.9B), over the next five years, as it embarks on its Upstream and Downstream expansion and growth projects. The SPC also approved ADNOC’s plans to explore and appraise Abu Dhabi’s unconventional gas resources, as the company seeks to enable future value creation from its untapped gas resources. And, the SPC gave the green light to ADNOC to pursue international downstream investments.

Sheikh Mohammed reaffirmed ADNOC has the unwavering support of UAE President His Highness Sheikh Khalifa bin Zayed Al Nahyan.

We will make strategic, commercially driven and targeted investments, across our entire value chain.

Dr. Sultan Ahmed Al Jaber, Minister of State and ADNOC Group CEO, said: “His Highness Sheikh Mohamed bin Zayed and the SPC’s approval of our expanded strategic investment and growth plans signal a further, tangible, acceleration in ADNOC’s transformation. It marks the next phase in delivering our 2030 strategy, which will contribute to further maximizing value from all our resources, introduce new and significant partnership opportunities and enhance our capabilities to diversify our portfolio of products, as we aim to expand into key growth markets.

“In line with the SPC’s directives, over the coming years, we will make strategic, commercially driven and targeted investments, across our entire value chain, aimed at maximizing existing resources, while also identifying and developing new, value-enhancing opportunities.”

He also added: “Furthermore, our intention to explore and appraise our unconventional resources, in collaboration with value-add, strategic partners, reinforces ADNOC’s objective to further diversify our hydrocarbon assets base and enable value creation through vast untapped resources. We aim to unlock and deliver material and commercially viable production from Abu Dhabi’s unconventional resources by 2030, with a focus on gas and gas liquids,” Dr Al Jaber added.

On track to expand oil output

As it accelerates delivery of its 2030 strategy, ADNOC said it continues to optimize its Upstream operations and drive solutions to maximize recovery from its mature reservoirs, while seeking ways to cost effectively unlock the potential of untapped resources and leverage technology economies of scale to keep the operating cost per barrel at the most competitive level. It remains on track to expand oil production capacity to 3.5 million barrels a day by the end of 2018, and to improve drilling time by 30 per cent by 2019. The company noted that its enhanced efficiencies have brought ADNOC’s low production cost down even further, a factor driving interest in the upcoming offshore concessions, which have attracted more than 14 potential partners from across the world.

In gas, ADNOC is focused on ensuring a sustainable and economic supply of gas for the UAE’s growing demand. To help achieve this ADNOC will access undeveloped tight reservoirs, tap into its gas caps and expand sour gas production. In addition, it has started an exploration drilling program to explore for, and appraise, the potential of individual gas deposits in tight reservoirs.

ADNOC plans to secure additional captive crude processing capacity in growth markets, establish sector specific global businesses and enhance its global marketing activities, including introducing non-speculative asset-backed trading, to further stretch the dollar from every barrel of oil it produces.

Growing crude refining capacity

In support of its expanded 2030 strategy, ADNOC will grow its crude refining capacity by 60 per cent and more than triple its petrochemical production, to 14.4 mtpa by 2025 through a staged expansion plan aimed at initially optimizing its existing assets to grow and diversify its products portfolio. An aromatics project will convert naphtha, which is currently exported, into gasoline and aromatics and a large project to enhance the crude processing flexibility of its 900,000 bpd refining system will be taken forward.

Delivery of ADNOC’s expanded 2030 strategy builds on three changes it has made to the way it operates. It has expanded its approach to partnerships, to capitalize on growth opportunities, enhanced its capital structure, to more smartly finance its business, and revised the way it manages its portfolio of assets, to drive performance and unlock lasting value.

IPO of ADNOC Distribution

ADNOC recently confirmed plans to offer a minimum 10 percent stake, or 1.25 billion shares, and a maximum 20 percent stake, or 2.5 billion shares, in the partial IPO of ADNOC Distribution, its fuel distribution unit. An indicative price range of between AED 2.35 and AED 2.95 per share, has been set. At the top of the range, the IPO would be the largest in the UAE since DP World was floated, 10 years ago.

The proposed ADNOC Distribution IPO, which will be the first time ADNOC has placed shares of one of its subsidiary companies onto the public markets, will offer both UAE and international investors the opportunity to invest alongside ADNOC in the region’s retail brand.