TBY talks to Dr. Sultan Al Jaber, CEO of ADNOC Group, on listing on the ADX, opportunities in refining and petrochemicals, and big data.

With USD851 million raised, ADNOC Distribution's listing became the biggest IPO on the ADX. What does raising capital mean for Abu Dhabi's economic environment as it progresses towards Vision 2030?

The 10% listing of ADNOC Distribution at the end of 2017 was the largest in Abu Dhabi in over 10 years, and the first public listing of an ADNOC company. It represents a tangible step in the execution of our new value creation strategy and demonstrates a clear example of the more proactive management of our portfolio of assets and capital. We have a very solid, focused, long-term business and growth strategy for ADNOC Distribution, executed by a highly experienced management team, which we believe will deliver long-term, sustainable growth and value creation for the company, for the benefit of all shareholders, as well as the wider UAE economy and, of course, our customers. The IPO represented a further step forward in the diversification, growth and development of the UAE's capital markets and specifically the Abu Dhabi Securities Exchange, attracting significant demand from both local and world-class international investors, and adding to the profile and liquidity of the exchange in a considerable way. The listing of companies like ADNOC Distribution are important events, as they bring new, large companies to the exchange and help diversify the investment sector offering to investors. The IPO attracted significant foreign direct investment into the UAE, with good take up from leading international institutional investors. It was multiple times oversubscribed on the qualified investor tranche, and the original size of the retail tranche was oversubscribed by 22 times. On the first day of trading, the stock rose as much as 16 per cent and continues to trade well since its float.

The Supreme Petroleum Council (SPC) recently approved ADNOC's plans to pursue international downstream investments for the first time in the company's history. What was the driver behind this decision and where do you see the greatest opportunities in both refining and petrochemicals?

Our upstream will always remain a fundamental and core part of our business, but you are correct, as part of our 2030 strategy, it is a strategic priority for us to significantly expand our petrochemical production to meet the growing demand for higher-margin products, such as polyolefins which is set to grow 150% by 2040. We intend to double our refining capacity and triple petrochemicals production capacity to 14.4 million tonnes by 2025, up from 4.5 million in 2016, while adding new products, including Aromatics and Linear Alkyl Benzene (LAB) to our mix. And as a tangible demonstration of our strategic intent to grow our downstream business, approximately 40% of the $109-billion-dollar five-year capex program, that was approved by the SPC and announced in November, is dedicated to achieving this very important objective. Through a new and ambitious domestic and international investment strategy, aimed at taking advantage of the demand emanating from global growth markets, ADNOC will become a leading global downstream player. This will be achieved by building on our already strong foundation in Ruwais, which we will expand to become the largest integrated refining and chemical site in the world. From this site we will refine nearly half of our crude and convert 20 per cent of that portion to chemicals and petrochemicals, which will offer a hedge to oil price fluctuations, while allowing us to meet growing global demand for higher value products. Our expansion plans for Ruwais are on a world scale, will contribute to the diversification of the UAE's economy and will also create thousands of jobs. We see great potential for overseas investment and expansion in Asia, where we are strengthening strategic relations. We recently signed the first concession agreement between the UAE and India, awarding a consortium of Indian oil companies a 10% interest in Abu Dhabi's offshore Lower Zakum concession. This mutually beneficial partnership will help India meet its growing demand for energy and refined products, create opportunities for ADNOC to increase its market share in a key growth market, and build a solid foundation as ADNOC explores potential international investments, particularly focused on downstream opportunities. We see growth throughout Asia. Since 2010, we have achieved a four-fold increase of sales volume into the region. We are therefore increasing our commitment to China to allow us to be even closer to our Chinese and Asia region customers, and to develop our relationships with our Chinese and Asian partners further, which will only bring about benefits to both sides. We are confident that our transformative value creation strategy will create a balanced and highly integrated Upstream and Downstream portfolio to secure ADNOC's long term and sustainable future for years to come.

Aside from Borouge 4, ADNOC holds strategic co-operations with Spain's Cepsa, BP, and with Germany's Linde through its Elixier JV. How does your new partnership model reflect the evolution of the challenges and opportunities in the oil & gas industry?

The global energy industry and market dynamic is changing at a rapid pace. Global demand for energy continues to grow – forecasts suggest by at least 25 per cent by 2040 – and this demand is shifting from West to East, with non-OECD countries expected to account for more than 70% of the world's demand within this timeframe, and, as I have mentioned, petrochemical demand will grow even more sharply, at more than 150% over the same period. Over the last two years we have taken a bold and ambitious dual track approach in our response to the evolving energy landscape that has helped ensure we are increasingly more resilient to market volatility and well positioned to capitalize on emerging and future growth trends. This dual track approach comprises a rationalization and culture transformation program aimed at: maximizing operational efficiency, optimizing our unit costs per barrel, enhancing profitability, and strengthening our overall performance. In parallel, we have launched a bold, new finance, investment and partnership strategy, which will greatly enhance our capital structure and returns, unlock and maximize value, accelerate our growth and performance, and secure new market opportunities. And we are of course seeking partners who can help us secure better access to our key target markets and customers, but we are also looking for partners to bring access to financing, business and operational expertise and knowledge, and technological innovation – all vital factors in ensuring we can create long term, sustainable and mutually beneficial partnerships. In the upstream we are exploring the creation of new partnership and co-investment opportunities in some of our services businesses, while at the same time looking for value-add companies that may also seek to partner or invest alongside us in other parts of our value chain. We are also developing innovative investment structures and ventures for further selected ADNOC infrastructure assets that we think might be attractive to both investors and business partners and that will provide compelling investments and returns. In our downstream business, where as I said we are looking to significantly expand our business and capability, we are also looking to create a number of new business and investment opportunities with long-term partners to help us drive growth, efficiency and knowledge transfer to generate greater returns from our assets, while also allowing us to develop and launch a number of new downstream business and product lines. The expansion of our downstream business will create a number of exciting new partnership opportunities in the years ahead.

How can the oil and gas industry remain ahead of the technological innovation curve—brought by big data, AI, and digitalization—and gain benefits across its whole value-chain?

In a world that is being transformed by new technology, we are also very focused on attracting different type of partners, not necessarily from the oil and gas industry, who can bring innovation, ideas and the application of cutting edge technologies to our business. We have already seen artificial intelligence transforming industries as diverse as manufacturing, retail and finance, and this technology is now being applied to the energy sector, where the possible benefits include minimizing disruptions, reducing costs and optimizing performance. The application of predictive analytics, for example, has the potential to enhance electricity grids by instantly evaluating terabytes of information to anticipate demand peaks and system stress. At ADNOC, we are leveraging the power of Big Data to augment visibility into our operations both below and above ground. As part of our ongoing transformation, we are exploring how AI could help further improve efficiency, make us more agile and drive profitability. We are keen to study how breakthroughs from other sectors, such as mobile technology, might be applied to the energy industry and specifically to ADNOC to help us lower costs and increase efficiency and performance across our value chain.

What is the strategy for the UAE to remain at the forefront of driving sustainability efforts across the world?

We believe that renewables and hydrocarbons complement each other in a relationship that makes perfect economic sense. The UAE, through Masdar and other initiatives has been at the forefront of developing and globally promoting a truly sustainable diversified energy mix. Masdar is a key investor in the largest wind farm in the world, the London Array and around the world we have invested in one gigawatt of solar power in projects spanning the UAE, Oman, Jordan, Mauritania, Egypt, Morocco, the UK, Spain, Seychelles, and the Pacific Islands. This commitment will continue. In January, Masdar completed the financing for Jordan's largest solar project, Beynouna, which will add 200 megawatts of capacity to Jordan's electricity grid.