Adnoc and China's Wanhua in LPG shipping joint venture
The firms will explore joint ventures in Abu Dhabi and China estimated to be worth $12bn
Abu Dhabi National Oil Company will form a shipping joint venture with China's Wanhua Chemical in the liquefied petroleum gas sector as they look to explore downstream opportunities in both countries, estimated to be worth $12 billion (Dh44.07bn).
The agreement builds on an earlier 10-year LPG supply contract and will include the operation of two Very Large Gas Carrier vessels.
The joint venture opportunity will look at downstream derivatives in the UAE including polyurethane value chain chemicals at Adnoc's refining and chemicals hub at Ruwais.
In China, it will explore opportunities for the development of petrochemicals and derivatives in Yantai, Shandong province.
Adnoc will supply additional feedstock to Wanhua as part of its joint venture agreements, the companies said.
"Building on our existing cooperation in the LPG space, the Shipping JV will see Adnoc capture additional margins and further maximise value across our LPG portfolio," Adnoc group chief executive and UAE minister of state Dr Sultan Al Jaber said in a statement.
LPG, a refined product, is in high demand in Asia, mainly as a cooking fuel stored in cylinders for stoves as well as a propellant, refrigerant, vehicle fuel and as a feedstock for the petrochemicals industry.
National oil companies such as Adnoc have begun negotiating and signing long-term contracts for products with buyers in East Asia as they look to secure market share and pivot business strategies to focus more on downstream activities. Adnoc currently produces 10.5 million tonnes of LPG per year. The firm is expanding its refining and chemical capabilities through investments of up to $45 billion with partners over the next five years, including plans to build the world's largest integrated refinery by 2025.
Last year, Adnoc signed a 10-year sales agreement with Wanhua, whose value was not disclosed, for the purchase of up to one million tonnes of LPG annually.
The latest agreement will leverage Adnoc's polyolefins capabilities with Wanhua's expertise in specialty materials to allow for a broader product range in building and construction, appliances, automotive, electronics and furnishings.
Wanhua is also set to play a key role in developing Adnoc's planned derivatives and conversion park to be situated in its downstream hub at Ruwais, the statement said.
The Chinese company is one of the world's leading producers for methylene diphenyl diisocyanate, often abbreviated as MDI - a key ingredient in the manufacture of high-performance adhesives and synthetic fibres. The company is also a major producer of toluene diisocyanate, abbreviated as TDI, which finds uses in the manufacture of flexible polyurethane foams used as support in car seats and upholstery. LPG is the key feedstock for the manufacture of both commodities, with the collective demand for the refined products set to exceed six million tonnes annually by 2021.
Wanhua owns the largest underground storage cavern for LPG with a total capacity of 2.4 million cubic metres as well as adjacent port facilities and berths.
Updated: July 23, 2019 05:29 PM