Having made its name as a crude exporter, Abu Dhabi National Oil Company (Adnoc) is the latest Middle East producer muscling in on the global refining and petrochemicals game, announcing recently an ambitious $45bn spending plan to turns its Ruwais refinery into a sprawling integrated refining and petrochemicals behemoth.

The collapse of oil prices in 2014 exposed the dangers of the region’s heavy reliance on crude export revenues, and the battle for market share in key consumer markets has sharpened the focus on seeking new revenue streams.

Adnoc and other regional producers now see petrochemicals as the source of the greatest growth in the next two decades, with demand expected to grow 150 per cent by 2040. CEO Sultan al-Jaber told delegates at the Adnoc downstream investment forum in Abu Dhabi that “given the projected increase in demand for petrochemicals and higher-value refined products, we are repositioning Adnoc to become a leading global downstream player”.

“Adnoc is a good example of a national oil company (NOC) that wants to take more commercial charge of its future,” said Stephen George, principal consultant at KBC. “While international oil companies are focused on their quarterly results, NOCs like Aramco and Adnoc can take a much longer-term view, changing the calculus of downstream integration.”

Polymers market

The emirate is not the only player banking on petrochemicals. Adnoc’s regional competitors are also looking to secure a bigger share of Asia’s fast-growing market for polymers, although they are all at different stages in their downstream push.

Saudi Aramco is moving ahead with a number of plans, including signing up France’s Total in early April to build a giant petrochemicals complex at its joint-venture refinery on the Gulf. The energy giant also restructured its board in April, appointing former executives from major chemicals producers, reflecting its strategic shift downstream.

Qatar Petroleum is also looking for partners for a new petrochemicals complex at Ras Laffan by 2025. At 1.6 million tonnes a year, the Qatari ethane cracker would be the largest in the Middle East.

The biggest factor in favour of Middle East producers is access to cut-priced feedstock. This will be a key competitive advantage. As is government commitment to the projects, with a clear willingness to stump up the cash if needed, or tap into debt markets.

Adnoc has also shown a new commercial acumen with the part privatisation of its retail arm. This comes in the wake of a new approach championed by Al-Jaber, where the value of each barrel will be stretched to its limit, one analyst said.

This article is extracted from a report produced by MEED and Mashreq titled The Future of Middle East Energy. Click here to download the report