VALUE MAXIMIZATION

Abu Dhabi 2019 | ENERGY | FOCUS: ADNOC DOWNSTREAM STRATEGY

ADNOC's Downstream Strategy represents one of the most important milestones for Abu Dhabi to continue to play a crucial role in the global energy market.

The unveiling of ADNOC's Downstream Strategy is not just another company announcement; it is a milestone for the whole UAE. It sets a clear path to cut through an uncertain future marked by an increasingly diversified energy mix.

ADNOC and Abu Dhabi are not afraid of change; if anything, they embrace it, seizing the opportunity to preserve their heavyweight role in the global energy market. With North American shale oil revolutionizing the hydrocarbon world and coal-to-chemicals technology making China a tough competitor in the Asian market, which will account for more than half of the world's GDP growth from 2017 to 2027, the GCC's oil-exporting countries are forced to take crucial decisions. In May 2018, at the ADNOC Downstream Investment Forum, Abu Dhabi showed the world its decision was made.

At the center of its new downstream strategy, ADNOC seeks to create, in Ruwais, UAE, the world's largest integrated refining and chemical site in the world under a USD45-billion investment. The plans include doubling crude oil refining capacity and tripling petrochemicals production, up to 14.4 million tons per year, by 2025.

Through strategic partnerships and investments, the strategy will build on the existing strengths and competitive advantages of the Ruwais Industrial Complex, which is already the fourth-largest refining complex in the world with a capacity of 922,000 barrels of crude and condensate per day. Surely, stretching the value of every barrel it produces will benefit
ADNOC, its partners, and the UAE, as the strategy seeks to create more than 15,000 highly skilled, specialized jobs by 2025 and contribute an additional 1% to GDP per year.

More specifically, ADNOC's Downstream Strategy includes a greenfield project to build a 600,000bpd crude refinery; a USD3.1-billion crude flexibility project; refinery modifications to process cheaper Upper Zakum oil and utilize the more expensive Murban crude for export sales; a gasoline aromatics project to upgrade the company's light and heavy naphtha streams; a new linear alkyl benzene project to produce common raw materials; and the mixed feed cracker, known as the Borouge 4 complex, which is already in the FEED phase.

One of the key sub-pillars of the strategy consists of the integration of assets, a crucial prerequisite to meet rising global demand and adjust to market trends. Integration reduces costs and increases supply chain operability, and, future growth will be led by petrochemical feedstock. As such, margins of refined and petrochemical products are slowly moving in the opposite direction of margins of unrefined products. Thus, merging the two assets makes ADNOC more stable.

Broadly speaking, the foray into downstream will create an added revenue source to mitigate fluctuations in the oil price. In the short term, it will create new opportunities for EPC contractors and manufacturers charged with the construction of new gas pipelines. And in terms of integration, a major opportunity is offered by the Internet of Things and the connected manufacturing systems, which can significantly improve the interconnectedness of operations, provided that they remain thoroughly protected from cyber-attacks.

In the long term, the challenge will lie in adjusting to the change in the chemicals growth model in a sustainable, yet competitive, way to push value through the downstream segment.
It started with the reorganization of one brand, and followed with the ongoing internationalization of its business model and partnership announcements. By displaying its commitment to pushing the value through the downstream segment, ADNOC keeps cruising relentlessly on its journey toward becoming a global energy player. The prolific shift best not be lost in the myriad of announcements: ADNOC is setting up the future of the UAE and knows exactly what it is doing.