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Abu Dhabi, UAESaturday 15 December 2018

Adnoc and Aramco agree pact to explore joint investments in LNG and natural gas 

The two companies are looking to increase revenues from LNG and gas segments

Saudi Aramco President Amin al-Nasser, left, shakes hands with Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO after signing their framework agreement at Adipec. AP
Saudi Aramco President Amin al-Nasser, left, shakes hands with Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO after signing their framework agreement at Adipec. AP

Abu Dhabi National Oil Company signed a framework agreement with Saudi Aramco, the world’s biggest crude exporter, to consider collaboration opportunities in the natural gas and liquefied natural gas sectors.

The deal between two of the biggest energy producers from the Arabian Gulf illustrates their strategic shift as they seek to boost revenues from natural gas and LNG business segments. They will partner on “techno-economic feasibility” studies and exchange knowledge and experience in LNG growth markets, according to a statement.

Under the terms agreed by Dr Sultan Al Jaber, Minister of State and Adnoc Group chief executive, and Amin Nasser, Aramco president and chief executive yesterday, both energy majors will jointly assess investment opportunities across the LNG value chain to drive revenue growth.

The UAE is increasingly deviating to gas, as it frees up more crude for exports. This month, Abu Dhabi’s Supreme Petroleum Council approved a five-year capital expenditure plan of Dh486 billion for the state-run company to increase capacity and unlock its sour gas caps, as well as develop and acquire downstream capabilities at home and abroad.

The Emirates, which accounts for 3.1 per cent of proven reserves of natural gas, announced it had found 15 trillion cubic feet of gas in existing and untapped blocks last week. The discoveries would attain a 7.1 per cent addition to existing reserves of gas, which stood at around 209.7 trillion cubic feet at the end of 2017, according to the latest BP Statistical Review of World Energy.

In May, Adnoc launched its first licensing round for oil and gas, offering up to six blocks for international companies to bid on. Adnoc and Aramco are also eager to expand abroad and boost refining and petrochemicals production to extract maximum value from their crude. In June, the two companies signed an agreement to invest in a $44bn refinery on the west coast of India. In April, Aramco signed a deal to jointly develop the 1.2 million barrels per day Ratnagiri refining and chemicals complex in western Indian state of Maharashtra with a group of domestic state-backed refiners.

Aramco will share its stake with Adnoc, marking it as the first such agreement between the two energy companies.

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Adnoc to invest Dh165bn with partners in downstream

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“Increased co-operation between Adnoc and Saudi Aramco will ensure greater energy security and long-term economic prosperity for both nations,” Dr Al Jaber said.

“This agreement reinforces our strategy to undertake partnerships with forward-thinking partners who can help accelerate access to new growth centres of global demand. It will ensure that we are well-positioned to secure greater returns from global LNG demand growth by combining the technological and operational expertise of two of the world’s leading national oil

companies.”

The framework agreement between the two NOCs follows the approval from Abu Dhabi’s Supreme Petroleum Council for Adnoc’s new integrated gas strategy that will sustain LNG production to 2040.

The blueprint is to enable Adnoc to explore LNG investment opportunities, as well as create additional value from international LNG trade expansion, in response to the strong demand from Asian markets.

LNG is the fastest-growing hydrocarbon resource with a growth rate of 4 per cent per annum, twice that of natural gas. Global LNG demand is expected to exceed 500 million tonnes per year by 2035, up from nearly 300 million tonnes per year in 2017.

Adnoc LNG, a subsidiary of the state producer in operations for four decades, accounts for about 2 per cent of the global share of the LNG market, according to the statement.

“Our partnership with Adnoc continues to strengthen. We have shared strategic interest to expand our gas businesses, and this new agreement underlines our confidence in strong global gas demand growth,” Mr Nasser said.

“Our co-operation further supports the corporate transformation strategy of both Adnoc and Saudi Aramco to pursue opportunities that help unlock greater value for both companies and meet the growing needs of stakeholders around the world that depend on our energy to develop and grow their economies.”

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Saudi Arabia is the world’s biggest oil exporter and Opec’s only swing producer. The UAE, Opec’s fourth-largest producer, accounts for 4.2 per cent of global production of crude, according to the BP Review.

Separately, Adnoc signed a preliminary agreement with the Indian Strategic Petroleum Reserves (ISPRL) company to explore the possibility of storing Adnoc crude at the firm’s underground oil storage facilities in India.

ISPRL, an Indian government-owned company mandated to store crude for emergency has 2.5 million tonnes, about 17 million barrels of oil capacity divided into four equal compartments at its Padur facility in southern India, Adnoc said.

Under the agreement, Adnoc could store crude in two compartments at Padur.

The Abu Dhabi state producer is the only foreign oil and gas company to invest, by way of crude oil, in India’s strategic petroleum reserves programme.