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ADNOC Plans Major Overhaul

Sep 07 2019 Read 526 Times

The Abu Dhabi National Oil Company (ADNOC) is planning a radical overhaul of its operations, according to several sources quoted by Reuters who claim to have inside knowledge of the situation. As well as having hired a clutch of industry experts and ex-employees of peer companies, the Emirati state-owned company is also aiming to launch a regional oil benchmark later this year.

Although the deal has not yet been made official and must first receive approval from the UAE authorities, it would represent a significant shift in policy if it goes forward. Often considered one of the most conservative oil firms in the region, ADNOC’s latest plans are a clear signal of intent from Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed to turn the country into a leading light among Middle Eastern nations.

Already a leading player

The UAE is already the eighth biggest oil-producing country in the world and the fourth-biggest producer in the Organisation of the Petroleum Exporting Countries (OPEC), behind Saudi Arabia, Iraq and Iran. It currently pumps approximately three million barrels per day and has plans to increase that output to four million by next year.

The majority of that oil is produced by ADNOC, the state-owned oil giant. Their success has been built largely on a risk-averse policy of selling directly to end-users across Asia and beyond. Its trading operations have also relied on a retroactive pricing system, in stark contrast to the forward pricing employed by rivals Saudi Arabia, Iraq and Kuwait. However, it looks as though ADNOC may be willing to move with the times in order to capture additional value.

Over the last 12 months, ADNOC has hired a plethora of trading veterans, including executive vice president Philip Koury, head of crude Emmanuel de Reynis and head of products Lionel Richardson, among others. The expertise provided by this team should endow ADNOC with the knowledge and ability to take the next step by launching its own benchmark.

Launching a benchmark

It is being reported that such a launch has been identified as one of the key methods of securing a greater market share, bolstering profits and cementing its status as leader in the region. The ADNOC benchmark Murban would have the distinct advantage of bypassing the troublesome Strait of Hormuz, through which approximately 20% of global oil supplies currently travel.

However, political unrest surrounding Iran has prompted speculation as to how OPEC will act next, both in terms of their production strategies and how they deal with the Iran situation. The launch of Murban could provide one solution to that problem, given that ADNOC exports its oil from Fujairah, where it is currently developing storage facilities and has allegedly been in talk about expanding further through a collaboration with Dutch company VVTI.

Sources are also reporting that ADNOC is willing to lift restrictions on oil resales in order for Murban to become a regional (and perhaps even global) benchmark. Even though Murban is comparatively lighter than most grades in the Middle East, a surplus of US light crude could help to bolster ADNOC’s chances of success. Want to find out more about the US oil industry? Take a look at the article 'Trailblazing conference continues to transform the analytical world'

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