Adnoc to become a major downstream player, experts say

Abu Dhabi

Energy experts expect the latest deal between Abu Dhabi National Oil Company (Adnoc), Italy’s Eni and Austria’s OMV will help the company to become a major downstream player and expand its footprint.

“This is a significant shift in strategy and business model as well. Traditionally national oil companies tend to focus on upstream but priority is shifting deeper into the value chain. They (Adnoc) are deepening their outlook and trying to maximize value from the value chain,” said Jaafar Al Taie, managing director of Manaar energy group.

“It is a very new type of approach. It is almost of a measure of a progressive national oil company to the degree it can stop thinking merely as producer and think more as an integrated energy player.”

“This also reflects the saturated nature of oil and gas business. It is not as easy to make money and to have a sustainable business as it used to be. You have to think deeper as a producer, as a consumer reflecting the complexity of oil and gas business today.”

In similar comments, Ehsan Khoman, Head of MENA Research and Strategy at MUFG Bank Ltd said, “This announcement plays into Adnoc’s underlying strategy of becoming a leading global downstream player and full-integrated vertical energy company.”

“Importantly, this transaction will expand the company’s geographical footprint with the likely expansion into European markets for Adnoc’s refining products over time.”

Adnoc on Sunday announced that it signed two equity partnership agreements with Italy’s Eni and Austria’s OMV in refining and trading, supporting the company’s ambition of becoming a major downstream player.

As per the agreement, which Adnoc said as “one of the largest ever refinery transactions”, Eni and OMV will acquire 20 per cent and 15 per stakes in Adnoc Refining respectively, with Adnoc owning the remaining 65 per cent.

The agreement values Adnoc Refining, which has a total refining capacity of 922,000 barrels per day at $19.3 billion, according to the statement.

The partners will also establish a trading joint venture, in which Eni and OMV will own 20 per cent and 15 per cent of the shares respectively.

Dr Sultan Ahmad Al Jaber, UAE Minister of State and Adnoc Group CEO said the new partnerships will support the company’s ambition of becoming an international downstream leader with the flexibility to respond quickly to shifting market needs and dynamics.