The largest oil producing company in the United Arab Emirates is making great efforts to enhance its emerging commercial operations into a multi-billion dollar business during the current decade by strengthening its presence in Europe and Africa, and expanding its activities in other areas of energy.
In an attempt to catch up with long-established rivals, Abu Dhabi National Oil Company (ADNOC) wants to capitalize on the gap created by Europe's shift away from Russian fuel, according to people familiar with the company's plans.
The people, who asked not to be named because the plans are not announced, said that ADNOC is seeking to obtain fixed-term contracts for crude oil, refined fuel and liquefied natural gas and supply these quantities to the region.
liquefied natural gas
Over the next year, ADNOC aims to conclude two to three long-term contracts for the purchase of liquefied natural gas and several separate supply deals with customers, according to one of the people. Expansion in the LNG field will be the main focus after last year it hired three traders from Litasco, a unit of the Russian Lukoil company.
These moves come as part of ADNOC's broader campaign to acquire assets across the world, including efforts to acquire German chemical company Covestro for $12 billion and a $2 billion offer with BP to buy an Israeli gas production company.
Since CEO Sultan Al Jaber took office in 2016, the company has abandoned its previous conservative approach and sought to achieve an ambitious global presence.
Musabih Al Kaabi, who oversees ADNOC's global growth, said during an interview in Singapore on September 6: We are working on implementing a strategy aimed at expanding internationally, and like integrated energy companies, we continue our search for opportunities to maximize value.
ADNOC's strategy changed
The ambition to intensify trade in Europe and Africa represents a change in the strategy of ADNOC, which has been accustomed to contracting the majority of its oil and gas in Asia since its founding more than half a century ago. While ADNOC Trading was established in 2020, it wants to match independent trading companies and major integrated companies such as Shell, not only in achieving billions of dollars in profits, but also in its influence as it is among the major trading companies.
ADNOC plans to expand its liquefied natural gas business globally
Competition is expected to be fierce, with established companies already operating for several years and others from the Middle East getting a head start.
For example, Saudi Aramco has strengthened its trading unit, continues to work on its plans to handle greater volumes of fuel outside of London, and also has refining projects in Denmark and Poland that process its crude oil and provide products to sell. While Kuwait has a refinery in Italy, and Oman - which began its first government business in the region - has international offices and contracts.
Enhance market share
Vandana Hari, founder of Vanda Insights, explained: The increased volatility in markets in recent years is a phenomenon that will likely become the new normal, but at the same time it presents a greater opportunity to profit from trade compared to previous years, and the challenge for these new entrants will be Winning market share from more established competitors in a high-risk but high-reward business.
Last year, ADNOC considered buying all or part of trading company Gunvor Group, which would have given it significant weight in the sector and access to supply contracts for commodity trading companies. But the deal did not happen, and the UAE government company is currently working to expand its commercial business internally.
New office in Geneva
ADNOC Business aims to open its first European office in Geneva by the end of 2024, followed by a center in Houston the following year, according to one of the people involved in the matter. The company already has an office in Singapore that largely deals with chemicals trading.
Fuel sales to individuals and companies increase ADNOC Distribution’s quarterly profits by 45%
The company also already trades Nigerian crude oil through long-term contracts, with the help of financing arrangements that pay money for barrels of crude. Its traders tested different grades of crude, often intended for the largest Emirati refinery in the Ruwais region, located on the Arabian Gulf.
While ADNOC produces enough crude, it buys oil from Nigeria, Yemen, Angola, and from far-flung locations such as Norway and Australia. At least one Russian shipment has arrived in the Ruwais area, as well as several shipments of Kazakh crude oil.
In Africa and Central Asia, ADNOC hopes to leverage shared religious and cultural factors, as well as government and financial influence, to secure deals. In Kenya, the company won part of a government fuel supply tender earlier this year. ADNOC also provides political support and cash for investment, and has a strong desire to buy assets that it can trade.
