Six investors to buy 49% stake in ADNOC's gas pipeline for $10 billion
UAE wants to reach gas self-sufficiency, even become net exporter
OPEC's third largest oil producer wants to wean itself off Qatari gas
Dubai — Abu Dhabi National Oil Co., the UAE's biggest energy producer, is expected to use proceeds from its $20.7 billion gas pipeline deal to help finance projects aimed at boosting production to eventually reach gas self-sufficiency and even become a net exporter, according to analysts.
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Register NowADNOC said on June 23 it had signed a deal worth more than $10 billion with six investors to sell a 49% stake in its gas pipelines, valued at $20.7 billion, a year after striking a similar transaction for its oil pipelines. The consortium includes Global Infrastructure Partners, Brookfield Asset Management, Singapore's sovereign wealth fund GIC, Ontario Teachers' Pension Plan Board, South Korea's NH Investment & Securities and Italy's Snam.
ADNOC, which currently produces around 10.5 Bcf/d, is undertaking multi-billion dollar projects with international oil companies to develop its costly sour and unconventional gas assets to ramp up production.
"The diversification of asset ownership in the Abu Dhabi midstream sector is an important element of ADNOC's new gas strategy," said Siamak Adibi, head of the Middle East gas team at consultancy FGE.
"Asset sales provide new source of funds for ADNOC and they can spend on development of gas resources."
Asset sales
ADNOC is no stranger to asset sales.
It has sold stakes in its oil and gas concessions, in its drilling business, refining unit and pipelines to international oil companies as it seeks to monetize its assets and generate financing for its mega-projects.
Last year, it became the first Middle East national oil company to strike a deal with institutional investors for its midstream assets.
ADNOC clinched a $5-billion deal, with a consortium that includes GIC, BlackRock, KKR and Abu Dhabi Retirement Pensions and Benefits Fund, to invest in select oil pipeline infrastructure and collectively hold a 49% stake in the assets.
"The funding will be important for the overall gas strategy -- it's an important source of capital, and we have to remember that ADNOC has a lot of costly ambitions such as downstream and petrochemicals, sour gas development and so on," said Ben Cahill, Senior Fellow, Energy Security and Climate Change Program at the Center for Strategic and International Studies. "It also allowed them to strike a new partnership with Snam, an experienced gas infrastructure player."
Qatari gas
Last year, Abu Dhabi's Supreme Petroleum Council announced increases in hydrocarbon recoverable reserves of 7 billion stock tank barrels of oil and 58 Tcf of conventional gas, bringing the total to 105 billion STB of recoverable oil, 273 Tcf of conventional gas and 160 Tcf of unconventional gas resources.
With the help of Germany's Wintershall and Italy's Eni, ADNOC is developing the Ghasha ultra-sour gas concession, which is expected to produce over 1.5 Bcf/d by around 2025. In addition, it is also partnering with Dubai's gas supplier DUSUP to develop a new shallow gas reservoir with estimated reserves of 80 Tcf.
"Boosting gas self-sufficiency is critical, given the desire to wean the UAE off dependence on gas imports from Qatar via Dolphin Gas," Cahill said. "We still don't know how much it will cost to develop Jebel Ali, how many development wells will be required, and what the recovery rate is."
Qatar pipes 2 Bcf/d of gas to the UAE under an agreement that expires in 2032.
"Other Gulf states are also selling oil and gas assets and privatizing stakes as they search for funds, especially Oman, but the scale is a lot bigger in Abu Dhabi,"
"They are first movers in generating this much capital from the midstream segment, which is often overlooked relative to the upstream and downstream. And for ADNOC this strategy isn't unique to the midstream, they're looking to unlock capital and partnerships across the value chain."
Coronavirus impact
However, ADNOC's gas ambitions may be stymied by the coronavirus.
ADNOC terminated $1.65 billion worth of contracts awarded in February to a Petrofac-led group for the ultra-sour gas project Dalma Gas Development project, part of Ghasha project, the oil service company said in April.
Eni, which has a 25% stake in Ghasha, also plans to review its projects in the UAE with its partners due to the coronavirus outbreak and the oil price crash, executive vice-president for the Middle East at Eni, Fuad Krekshi, said in March
"The depressed state of the energy-price complex does present serious challenges to the country's goal of becoming a net natural gas exporter, with major partners in UAE gas projects like Eni and Total cutting capital expenditure globally, a dynamic that will bring headwinds to Abu Dhabi's natural gas production growth goals," senior analyst at S&P Global Platts Analytics, Samer Mosis, said.
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June 24, 2020 at 06:15PM
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ADNOC's $20.7-bil gas deal seen helping finance self-sufficiency projects - S&P Global
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