Structure

Abu Dhabi National Oil Company (Adnoc) was established in 1971 to operate in all areas of the emirate’s oil and gas industry. The group ranks among the top 10 oil and gas companies worldwide, managing and overseeing oil capacity of 2.7 million barrels a day (b/d) and wet gas handling capacity of 7 billion cubic feet a day (cf/d).

Adnoc holds the majority stakes in 15 subsidiary companies active across the length of the oil and gas chain, including interests in exploration, production, refining, processing, petrochemicals, transport and services. Its current focus includes boosting gas output, optimising hydrocarbon recovery and assessing undiscovered reserves.

The firm’s overall strategy is shaped by Abu Dhabi’s Supreme Petroleum Council, which is chaired by UAE President and Abu Dhabi ruler Sheikh Khalifa bin Zayed al-Nahyan. Adnoc has formed several joint ventures to manage its major oil concessions, in which it is the majority shareholder with one or more international oil companies taking smaller stakes.

Operations

Among Adnoc’s 15 subsidiaries, there is one major onshore oil and gas producer – Abu Dhabi Company for Onshore Oil Operations (Adco) – and two offshore producers: Abu Dhabi Marine Operating Company (Adma-Opco) and Zakum Development Company (Zadco).

Adco is the largest oil producer in the UAE with capacity of about 1.4 million b/d. Adnoc holds a 60 per cent stake, with the UK’s BP, US-based ExxonMobil, UK/Dutch Shell and France’s Total holding 9.5 per cent each and Portugal’s Partex Oil & Gas owning 2 per cent.

Adco operates the emirate’s onshore and shallow coastal water concessions and produces from six oil fields. It is undertaking a major capacity expansion programme, which will add some 220,000 b/d of new capacity by the start of 2013 and a further 180,000 b/d by 2015.

Adma-Opco, whose activities date back to the 1950s, was formed in 1977 to operate offshore oil and gas fields. Today, the joint venture has capacity of 500,000-600,000 b/d coming from two major fields: Umm Shaif and Lower Zakum. The operator is planning expansions at both fields as well as full field developments at Nasr, Satah al-Razboot (Sarb) and Umm al-Lulu.

Zadco was formed in 1977 to operate the Upper Zakum field and, later, also took over the Umm al-Dalkh and Satah fields. Zadco’s total capacity is about 550,000 b/d.

Other major operations include the gas group Abu Dhabi Gas Industries (Gasco), which processes associated and non-associated gas along with natural gas liquids extraction at four onshore plants. Abu Dhabi Gas Development Company (Al-Hosn gas) is a 60-40 joint venture with US-based Occidental Petroleum, responsible for developing the Shah sour gas megaproject. Adnoc also produces and exports liquefied natural gas through its subsidiary, Abu Dhabi Gas Liquefaction Company (Adgas).

The company owns the UAE’s major downstream oil assets, with subsidiary Abu Dhabi Oil Refining Company (Takreer) operating the major Ruwais refinery and the smaller Umm al-Nar refinery in Abu Dhabi city.

Ambitions

Adnoc’s key target is to increase oil production capacity to 3.5 million b/d by 2018, from an estimated 2.6-2.7 million b/d in 2012. Nearly all of the additional capacity will come online after 2013 from the development of offshore oil fields. Abu Dhabi is also looking to increase gas production capacity on the back of the Shah sour gas megaproject, and could invest in a second sour gas scheme in the coming years.

The largest investment in Abu Dhabi’s offshore oil and gas sector is in Zadco’s expansion of the Upper Zakum field’s capacity to 750,000 b/d from the current level of 500,000 b/d. The megaproject will be developed in three stages. An estimated $4bn contract for engineering, procurement and construction (EPC) on early production facilities is expected to be awarded by the end of 2012, while a separate $800m deal was awarded in July.

Adma-Opco, meanwhile, is developing three new offshore fields that will add 265,000 b/d of new capacity at a cost of more than $5bn. This includes 100,000 b/d from both the Umm al-Lulu and Sarb full field developments and 65,000 b/d from the Nasr field. As of September 2012, Adma-Opco had received technical and commercial EPC bids for different phases of the full field developments on the Umm al-Lulu and Sarb fields.

Onshore, Adnoc is undertaking developments to boost production capacity to 1.8 million b/d from 1.4 million b/d over the coming years. The programme includes starting production at two new fields – Qusahwira and Bida al-Qemzan – and expanding output at the Ruwais and Bab onshore fields. The Bida al-Qemzan project is being commissioned as of late November 2012, while the Qusahwira field is expected to come on stream in 2013.

Adnoc is expanding its gas capacity through flagship projects such as the Shah sour gas project, the Integrated Gas Development – linking offshore associated gas production with onshore processing – and the expansion of the Habshan gas plant. The company is also doubling the capacity of its Ruwais refinery to increase downstream oil production.

Partnerships agreements due for renewal

International oil companies (IOCs) have played a major role in the development of the UAE’s oil and gas industry.

Unlike elsewhere in the GCC, they have maintained a constant presence in Abu Dhabi over the past five decades. Today, all of Adnoc’s major upstream operating companies, along with the downstream fertiliser and petrochemical ventures, count foreign partners in their shareholdings.

This enables Adnoc to access their expertise and technology. However, several upstream concession agreements are up for renewal over the coming decade, with the first, for Abu Dhabi Company for Onshore Oil Operations (Adco), due to expire in 2014.

The expiration of Adco, which produces the majority of Abu Dhabi’s crude, asks important questions about the emirate’s future partnership strategy. In July, Adnoc officials said they were open to allowing new partners to take shares in oil and gas concessions.

Adnoc, which exports most of its crude to Asia, has only partnered with Western and Japanese companies on major oil concessions in the past, but is becoming more open to possible South Korean and Chinese partnerships in future developments.

It is unclear at this stage whether Adnoc plans to keep Adco’s existing partnership of BP, ExxonMobil, Shell, Total and Partex together, add new companies, substitute existing companies, or break up the existing concession into smaller parts.

The continued involvement of BP appeared to be under threat earlier this year, when Adnoc sent out invitations to bid for the post-2014 concession in June, but did not include the British energy major in its list. BP has been subsequently invited as of mid-December, with Adnoc expected to announce a shortlist of bidders in the coming months. According to reports, a visit to Abu Dhabi by UK Prime Minister David Cameron helped negotiate the U-turn on BP’s invite.

The company has said it envisages a similar partnership with Adnoc holding 60 per cent and one or more companies participating in the remaining 40 per cent.

Adnoc must find a balance between keeping IOCs on board with their knowledge of the market and technical expertise, and introducing Asian partners to improve its relationships with customers. 

Abu Dhabi Gas Industries’ (Gasco) concession signed a 20-year contract extension in April 2009 with the same partners – Shell, Total and Partex – although the terms and conditions have been changed.

The UAE’s major offshore concession, Abu Dhabi Marine Operating Company (Adma-Opco), is also up for renewal in 2018, and the country’s oil market could look very different after the next round of expansions.

While Adnoc’s long-standing relationship with IOCs looks set to continue, many IOCs and national oil companies so far kept out of one of the world’s biggest oil and gas industries will be keen to take their place.

Company snapshot

Date established 1971

Main business sector Oil and gas exploration, production and processing, refining, petrochemicals, fertiliser, transport and services

Chief executive officer Abdulla Nasser al-Suwaidi.

Website www.adnoc.ae

Telephone (+971) 2 602 0000