His Excellency Suhail Mohamed Al Mazrouei, UAE Minister of Energy, held a press conference to answer key questions of the media on November 9th on the sidelines of ADIPEC. Moderated by Sean Evers, managing partner at Gulf Intelligence, the event also hosted Dave Ernsberger, global head of oil content at S&P Global Platts.
In answering the first question, Al Mazrouei touched upon a crucial aspect of the UAE’s energy expansion strategy – its trade relations with India. “India is a very important market for us and a market that has the potential to grow. In fact, we have an old relationship in supplying India with crude. India will continue to be an opportunistic market (for the UAE),” he said.
India is building underground storage facilities at Visakhapatnam in Andhra Pradesh state, and Mangalore and Padur in Karnataka state, with a capacity to store about 5.33mn tonnes of crude oil to guard against global price shocks and supply disruptions. During the visit of a UAE delegation to Delhi in February this year, ADNOC signed key agreements, including a deal to use half of Mangalore’s 1.5mn tonne facility, which would make up 6mn barrels of oil. In return, ADNOC at the time said it would allow India to maintain about two-thirds of the stored oil for free.
“There is talk between India and ADNOC about the storage, similar to what we did in South Korea and in Japan. We will definitely announce once we reach a final agreement,” Al Mazrouei said. “When there is a major client requiring to have strategic storage, the typical response is to supply. Because their (Indian) refineries are used to certain types of crude and they would like to have a strategic reserve. This is typical and it happens and we have done it in other countries. We will continue to do this as a major exporter.”
ADNOC has embarked on a major consolidation drive, as part of its newly structured 2030 plan. The UAE oil giant in October announced the integration of two of its offshore oil companies – the Abu Dhabi Marine Operating Co (ADMA-OPCO) and the Zakum Development Co (ZADCO) – into a new entity. The same month, ADNOC also announced the consolidation of the operations of three of its shipping, marine and services companies – the Abu Dhabi National Tanker Co, Petroleum Services Co and Abu Dhabi Petroleum Ports Operating Co – into one firm in order to increase efficiency.
More recently, ADNOC has also said it would be merging the Abu Dhabi National Tanker Company (ADNATCO), Petroleum Services Company (ESNAAD) and Abu Dhabi Petroleum Ports Operating Company (IRSHAD) to optimise resources and assets. “This is an entire journey. We have seen lots of consolidations within the ADNOC group. And I would like to command Dr. Sultan al Jaber (UAE Minister of State and ADNOC group CEO) and his team for all of that work that they have done,” Al Mazrouei said.
“The idea is that we need to sharpen our pencils. We have a plan to become one of the, if not the most, efficient producer by reducing the cost per barrel. We already have some of the best reservoirs and some of the best reservoir management programmes. These resources can be further optimised for higher competitiveness,” the minister continued. “Of course, the merger between companies create value, which we have seen within the IOCs in the past. But it needs to be done with care and clear objectives. Otherwise, you will not achieve your target.”
The Abu Dhabi government has not limited its consolidation drive to just the ADNOC group, but has also shown a keen interest in implementing an exhaustive efficiency model, by deciding in July this year to merge two of its biggest investment firms into a single entity to create a giant portfolio (comprising mainly energy assets) that would help the economy take the next step towards diversification.
In response to a question by Oil & Gas Middle East on the timeline and benefits of the proposed merger of the International Petroleum Investment Company (IPIC) and Mubadala, Al Mazrouei said: “First, Mubadala and IPIC are not only oil and gas. They are investment funds with various investments. Every entity of them complements the other. They are a merger of equal size, but they are a little bit different in terms of focus. There is an overlap of course when it comes to upstream. What we are trying to achieve from this merger is creating champions and creating companies that can compete internationally and that can take a lead in growth.”
He continued: “The IPIC group, for example, already has a portfolio that comprises a large producer of petrochemicals (in the Gulf) together with the Abu Dhabi-based Borouge, while Mubadala has the third or fourth largest producer of aluminium and the second largest producer of semi-conductors.”
