Abu Dhabi Jumps Into Middle East Oil-Refining Rush
Author: Nicolas Parasie and Summer
Posted on The Wall Street Journal | Sunday 13th April, 2018
Abu Dhabi’s national oil company said Sunday it would spend $45 billion over the next five years to join other giant, state-run petroleum giants, like Saudi Aramco, in refining much of their own crude instead of just exporting it.
ADNOC, as the company is known, said it aims to create the world’s largest refining and petrochemicals complex about 150 miles west of Abu Dhabi, the capital of the United Arab Emirates and one of the world’s top oil exporters.
The initiative allows Abu Dhabi to join an oil refining boom in the Middle East, where, until recent years, petroleum-rich countries simply pumped crude and then exported it for processing elsewhere.
ADNOC follows Saudi Arabian Oil Co., known as Aramco, in building a refining empire.
Aramco has boosted its global refining capacity by more than a third to 5.4 million barrels a day, according to Scottish energy consultancy Wood Mackenzie. The kingdom has commissioned an additional refinery in its southwest region that is set to come online in 2019. Kuwait also is planning a boost in its refining capacity though on a smaller scale.
Along with new Asian refineries, the Middle East facilities have pressured older, less competitive refiners in Europe and led to widespread closures there. Saudi Arabia is now among the top suppliers of diesel fuel to Europe.
ADNOC said it wants to boost its refining capacity to 1.5 million barrels of crude a day, about half the crude it pumps, by 2025. That is lower than the percentage big oil companies like Exxon Mobil Corp. refine of their own crude but it would be up substantially from the 922,000 barrels a day that ADNOC refines today.
Focusing on refined products such as gasoline and petrochemicals and gives petrostates like the U.A.E. a buffer when oil prices drop. Refineries and chemical factories make more money when oil prices are low because crude is among their highest costs. Profit margins are generally higher on refined products than a barrel of crude.
ADNOC’s plans also fits into a broader play by Gulf governments to diversify their economies and to end their historic reliance on selling crude oil to generate the bulk of their revenues. With the new investment, ADNOC and Abu Dhabi hope to position themselves as a more attractive investment destination and a generator of high-skilled jobs.
Sultan al-Jaber, ADNOC chief executive and the UAE’s minister of state, said the company would raise the $45 billion on its own through its own cash and by raising debt.
“Whatever provides us with the cheapest cost of money,” he said in an interview.
Read at: https://www.wsj.com/articles/abu-dhabi-jumps-into-middle-east-oil-refining-rush-1526211446
Keywords: Middle East, UAE, Abu Dhabi, oil, trade