ADNOC: investment in refineries a must

by ArabianBusiness.com staff writer on Thursday, 01 March 2007

ADNOC is looking for a partner.

The Middle East and North Africa (MENA) region will need to invest US $56 billion per year, mainly in refining capacity, if it is to ensure ongoing energy security, delegates at the Middle East Fuels Symposium were told.

Ali Obaid Al Yabhouni, Head of Marketing Research & Analysis-ADNOC said that the biggest challenge facing the oil industry is the need to make massive investments to ensure energy gets to consumers.

"The need for such investments have been made clear over the past few years with considerable pressure being exerted on oil prices as a result of inadequate refining capacity, which has led to serious bottlenecks in product supply.

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"Poor financial returns - relatively low and volatile refining margins - have reduced the industry's willingness to invest in bringing new plants on-stream," he said.

A changing market, particularly where cleaner fuels are concerned, has also put considerable pressure on refining capacity.

"Since the early 1990s, increasing environmental concerns have forced refiners to make investment in meeting tighter product specifications, rather than expanding processing capacity to keep pace with oil demand growth," suggested Al Yabhouni.

He said this trend will continue as consuming countries continue to press for an improvement in fuel standards. This translates to making a substantial reduction in the sulphur content of the fuels, as well as incorporating improvements in other quality parameters.

Gulf countries are already making significant investment in refining capacity, conceded Al Yabhouni, but more needs to be done.

"Many billions of dollars are being spent across the whole value chain throughout the GCC. In the years to 2015, the region is expected to add more than 1.3 million barrels per day of new crude oil distillation capacity from more than 12 greenfield or expansion projects."

However, despite the heavy investments currently being made in the Middle East in new conversion capacity, Al Yabhouni warned: "OPEC estimates that by 2010 there will be a deficit of around 1 million barrels per day of conversion capacity, putting further pressure on the fuels business as a whole and instability in the fuels business is likely to continue for a few years yet."

ADNOC seeks someone to gas with

The Abu Dhabi National Oil Company (ADNOC) is seeking an international partner for a US $10 billion gas production facility in the emirate.

ADNOC, which is state-owned, is looking for a foreign partner to take a 40% stake in the new plant, which will produce up to three billion cubic feet of gas from onshore Abu Dhabi gas fields every day, according to the Al Khaleej newspaper.

Demand for gas in the emirate is increasing by 20% a year, said the report. Abu Dhabi has half of the UAE’s gas reserves.

Bids must be received by mid-April, and the report mentioned BP, Exxon Mobile, Occidental Petroleum Corporation, Chevron Corporation, Royal Dutch Shell and Total as possible contenders. Gas companies from Russia and Asia are also expected to bid.