In a major development for the regional oil and gas industry, Emirati energy giant ADNOC has announced it is considering the part-privatisation of select businesses within the group structure, in order to drive efficiency and optimise value from assets in its organisational portfolio.
In an official statement received by arabianoilandgas.com, ADNOC states it is considering the IPO of minority stakes of some of its services businesses ‘which have attractive investment and growth profiles’.
‘Central to ADNOC’s new approach will be the more active management of its portfolio of assets and businesses. Such IPOs would support the growth and expansion of the UAE’s private sector and equity capital markets and will allow the public, and other investors, to invest alongside ADNOC and benefit from the future growth of these assets’, ADNOC mentions in an official press release.
This reformist move by the Abu Dhabi National Oil Company (ADNOC) is along expected lines, especially since Saudi oil behemoth Aramco in January last year made public its plans to sell 5% of its shares through an initial public offering (IPO).
With Aramco galloping ahead with its plans for the stock listing of some of its assets, it was only a matter of time before its Gulf peer ADNOC would follow suit with a similar strategy.
ADNOC has clarified, however, that there will be no stock listing of the group holding company and that the Abu Dhabi government will continue to fully retain possession of its most-prized asset. Moreover, ADNOC will also remain the majority shareholder in any business whose shares would be floated.
The statement did not mention details about the timing of the stock listing, the percentage of shares that it would offer; which capital market/s, at home or abroad, it is eyeing for the IPO; or the assets within its portfolio it has potentially identified for privatisation. We expect information on these crucial aspects, as well as on the financial element associated with this key strategic plan, to emerge in the coming days.
Much like the Aramco IPO decision, which was part of the package of reforms implemented by the leadership in its strive towards Saudi Vision 2030, ADNOC says its transformation scheme is aligned with the objectives of its own 2030 growth strategy to deliver a more profitable upstream business, a more valuable downstream business, and an economic and sustainable supply of gas for Abu Dhabi.
‘It (the endeavour) will enable ADNOC to unlock and maximise significant value from across the group, drive business and revenue growth, optimise performance, and secure greater access for its products in key growth markets’, the statement reads.
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Commenting on the pragmatic approach adopted by ADNOC, the state-owned oil giant’s CEO and UAE Minister of State Dr Sultan Ahmed Al Jaber, said: “Shifting global trends are creating a new energy landscape where new rules of engagement are required. In this new energy era, we need more creative strategies and more flexible business models to capture growth.”
“Expanding our partnership model across the whole of our value chain and more actively managing our portfolio will allow us to both unlock value and reinvest capital into new, high growth opportunities. It will enable us to accelerate our growth, increase revenue and improve integration across the ADNOC value chain. It will also spur domestic economic growth as well as bring new jobs and benefits to the UAE and its citizens,” Al Jaber was quoted as saying in the press release.
At the heart of this new approach, ‘is a range of new and compelling partnership and co-investment opportunities in the oil, gas, refining and petrochemical space’. Some of these opportunities will include, but will not be limited to:
- Upstream – develop and further expand a regional, fully integrated drilling company. The development of upstream concessions with value-added partners that may also seek to strategically partner with ADNOC in other parts of the value chain;
- Midstream – create a new energy infrastructure venture to both generate value and further optimise ADNOC’s assets. This venture might include, for example, the bundling of select ADNOC infrastructure assets such as oil, gas or refined products pipelines and storage facilities;
- Downstream – further open ADNOC’s downstream business to create a number of new partnership and investment opportunities across its portfolio of refinery and petrochemical assets. These new ventures will bring in partners to improve integration, realise synergies and expand technological capability and output to meet the rising global demand for petrochemical products.
ADNOC has developed a clear set of criteria by which it will select new partners, including; the ability of partners to secure better access to the world’s fastest growing target markets for ADNOC’s products; the willingness to contribute technical expertise and co-develop new technologies alongside ADNOC’s own capabilities; and, the potential to co-invest strategically across different parts of a more integrated organisational value chain.
ADNOC says it will in turn offer innovative, attractive and stable investment opportunities that will bring select investor access to ADNOC’s world-class asset base that is both logistically and strategically advantaged and located in an investor friendly environment.
ADNOC will also look to broaden both the range and type of partners it works with, to include, for example, specialist infrastructure and energy investors, long term global investment institutions and other energy, services and petrochemical players, while also deepening its engagement with existing partners.
The new initiative will bring significant benefits to the UAE and its citizens. Most importantly it will create new, high-skilled jobs and attractive career opportunities across all parts of the ADNOC value chain, the UAE oil major hopes.
It is also expected to create greater commercial opportunities for the UAE private sector, SMEs and other ADNOC suppliers and will provide an additional boost to the domestic economy, as well as to the UAE’s own in-country value creation. Lastly, it will also increase foreign direct investment, technology and knowledge transfer into the UAE.
Al Jaber said, “We are looking for partners who are forward thinking and fast acting. We want value-add partners who share our values and are willing to contribute both capital and technological expertise for the joint pursuit of new growth opportunities and attractive returns. The ideal partner will bring tangible strategic value to ADNOC, including access to new markets, technical expertise, and a willingness to invest alongside us across our value chain.”
He concluded, “Our new partnership model represents an ambitious new direction for ADNOC that will allow us to compete and lead in the new energy era.”
