Insight: Abu Dhabi's oil champion ADNOC bets on global expansion

Greenhill & Co

09/10/2023 05:00

By Maha El Dahan, Yousef Saba and Ron Bousso
       DUBAI, Oct 9 (Reuters) - The United Arab Emirates is
refashioning state-owned Abu Dhabi National Oil Company (ADNOC)
in the image of an international oil major by stepping up its
global expansion and finding new revenue streams to maximise
earnings for the Gulf state.
    Like Gulf neighbours Saudi Arabia and Qatar, the UAE wants
to exploit its fossil fuel resources while there is still strong
demand for oil and gas and to spend the revenue on diversifying
its economy to lessen its dependence on hydrocarbons.
    As part of this strategy, ADNOC told Reuters it was actively
pursuing select opportunities in the areas of renewable energy,
gas, petrochemicals and liquefied natural gas (LNG), without
giving details of any specific targets. 
    Two people with knowledge of the matter said the company was
on the hunt for LNG assets in Africa and was considering buying
Galp's 10% stake in a multi-billion-dollar natural gas project
in the Rovuma basin off the coast of Mozambique.
    ADNOC declined to comment and Galp did not respond to
questions from Reuters.
    ADNOC has already been busy on the deal front this year. It
bought a stake in an Azerbaijani gas field, has put in an offer
with BP  BP.L  for a stake in Israeli gas producer NewMed Energy
 NWMDp.TA , has opened takeover talks with German plastics maker
Covestro  1COV.DE  and is looking to create a $20 billion
chemicals giant with Austria's OMV  OMVV.VI .
    The state-owned company also told Reuters it was investing
in energy trading, without giving further details. Reuters
reported last year that ADNOC was set to open a trading office
in Geneva and a representative office in London.
        "As part of our international growth strategy, we are
focused on expanding our presence in renewables, gas, LNG and
chemicals, and are actively pursuing select opportunities, while
also investing in and growing our trading capabilities," an
ADNOC spokesperson said in response to written questions.    
    ADNOC has two trading arms, both set up in 2020: ADNOC
Trading, which is focused on crude oil, and ADNOC Global
Trading, a joint venture with Italy's Eni  ENI.MI  and OMV which
is more focused on refined products.
    
    OIL MAJOR
    While ADNOC's deal-making dates back to 2017 when it listed
its fuel distribution unit, the pace of change accelerated after
a board meeting in November chaired by UAE President Mohammed
bin Zayed.
    The board brought forward to 2027 plans to almost double oil
output to 5 million barrels per day and also approved a
five-year business plan and capital spending of $150 billion.
    "The thinking is to move away from a traditional state oil
firm model to more like an IOC (international oil company)," a
source with knowledge of the matter said.
    The transformation at ADNOC is similar to ongoing changes at
state-owned energy giants in Saudi Arabia and Qatar.
    The national energy champions - ADNOC, Saudia Arabia's
Aramco  2222.SE  and QatarEnergy - drive their economies but
were traditionally focused on oil and gas production at home. 
    Now, as the transition to renewable energy accelerates, the
timeline is shortening for these so-called national oil
companies (NOCs) to monetise their reserves and they are also
doubling-down on opportunities further afield.
    To propel its changes, ADNOC has hired more than 3,370
staff, including 28 senior managers, so far this year from
companies such as global energy firms, trading houses, banks and
consultancies, according to data on employment network LinkedIn.
    LinkedIn data shows ADNOC's headcount is up 13% this year,
and by a quarter over the past two years, to about 32,750. The
actual number, however, which ADNOC has never disclosed, is now
over 40,000, one person familiar with the matter said.
    "As we continue to grow our business, we are creating
exciting opportunities for our talented workforce as we
accelerate the transformation, decarbonisation of and
future-proof our company," the ADNOC spokesperson said in
response to questions about hiring.
    
    SENIOR HIRES
    Michele Fiorentino, who was chief investment officer from
2017-2020, confirmed to Reuters that he recently returned to
ADNOC from U.S. oil services firm Baker Hughes  BKR.O  as
executive vice president for low carbon solutions and business
development. 
    He reports to Musabbeh Al Kaabi, ADNOC's low carbon
solutions and international growth chief, also a new hire who
came on board in January. Emirati Al Kaabi also chairs Mubadala
Energy and is on the boards of several state-linked firms.
    Other recent hires include Bart Cornelissen, who left
Deloitte to become ADNOC's senior vice president for group
strategy and portfolio last month, according to LinkedIn.
    Michael Hafner, a long-time investment banker in the energy
sector - most recently at Greenhill & Co  GHL.N  and previously
at Deutsche Bank  DBKGn.DE  and UBS  UBSG.S  - also joined ADNOC
last month as a senior adviser to the executive office for
business development.
    Cornelissen and Hafner did not respond to requests for
comment.
    Other senior managers have recently been hired from Western
firms including Morgan Stanley  MS.N , HSBC  HSBA.L , Natixis
 BFCEp.PA , Litasco, Borealis, TotalEnergies  TTEF.PA , Shell
 SHEL.L  and Eni, according to LinkedIn.
    Recent senior hires for ADNOC's trading arms include alumni
of Gunvor, Litasco, Shell and TotalEnergies, the employment
network showed.
    The UAE firm was looking to buy energy trader Gunvor Group
last year but talks fell apart because ADNOC wanted a
controlling stake and Gunvor's shareholder only wanted to cede a
minority, sources familiar with the matter have said.
    "ADNOC wants to expand in Europe, whether it was through
Gunvor or organically," a source with knowledge of the matter
said. "Now that the Gunvor deal is off the table, it will focus
on organic growth."

    CLIMATE SUMMIT
    Despite the speed of changes, analysts say ADNOC, like its
rivals in Saudi Arabia and Qatar, will always be limited to some
degree by government control.
    "NOCs - even if wannabe IOCs - are ultimately tethered to
their governments and must serve goals of the country's
leadership," said Neil Quilliam, associate fellow at the Chatham
House think tank said. 
    "There is nothing wrong with that and plenty of national
champions serve that purpose, but the price to pay will always
be ADNOC's freedom for manoeuvre," he said.
    The mission to maximise oil revenues to fund the economy's
transition is also hard to square with the global push to
accelerate the shift toward lower-carbon fuels and to reduce the
production and consumption of fossil fuels quickly.
    The United Nations, for example, has come under fire for
giving the presidency of this year's COP28 climate summit to the
UAE. Sultan al-Jaber, ADNOC's CEO since 2016, will preside over
the meeting, which climate activists say will limit the ambition
of efforts to mitigate climate change.
    Jaber's supporters, which include for example U.S. climate
envoy John Kerry, have said his ADNOC role would help bridge the
gap in the conversation and accelerate change.
    ADNOC has said it will spend $15 billion on climate-friendly
projects by 2027. Jaber also chairs Abu Dhabi company Masdar, of
which ADNOC owns 24%. It aims to install 100 gigawatts of
renewable energy by 2030, and to eventually double that.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
UAE brings forward oil production capacity expansion to 2027   
 urn:newsml:reuters.com:*:nL1N32O10H
OMV to enter talks with ADNOC to create $20 billion chemicals
giant     urn:newsml:reuters.com:*:nL1N3901EE
Abu Dhabi’s ADNOC to acquire 30% stake in Absheron gas field   
 urn:newsml:reuters.com:*:nL1N39L0BD
Panel reviewing BP, Adnoc offer for Israel's NewMed seeks higher
price     urn:newsml:reuters.com:*:nL2N3B80JY
UAE's ADNOC to open Swiss trading office next year   
 urn:newsml:reuters.com:*:nL8N31B3V0
UN chief laments 'naked greed' of fossil fuel interests,
countries criticize big polluters     urn:newsml:reuters.com:*:nL1N3AW1AC
U.S. climate envoy Kerry hails holding COP28 conference in OPEC
member UAE     urn:newsml:reuters.com:*:nL1N32X25S
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Maha El Dahan and Yousef Saba in Dubai and Ron
Bousso in London; Editing by David Clarke)
 ((Maha.Dahan@thomsonreuters.com, @mahaeldahan))