ABU DHABI, United Arab Emirates—Italy’s Eni and Austria’s OMV have agreed to pay a combined $5.8 billion to take a stake in Abu Dhabi National Oil Co.’s (ADNOC) refining business and establish a new trading operation owned by the three partners.
The transaction, which expands ADNOC’s access to European markets, furthers Eni’s diversification away from Africa and gives OMV a downstream oil business outside Europe. It was hailed as a “one-of-a-kind” deal by ADNOC’s CEO Sultan al-Jaber.
“The whole oil and gas industry hasn’t seen a transaction of this size and sophistication,” he said.
Under the agreement, Eni and OMV will acquire a 20% and a 15% share in ADNOC Refining respectively, with ADNOC owning the remaining 65%, the three companies said in statements on Sunday.
The partners will own the same proportions of the joint trading venture, they added.
OMV said that it would pay around $2.5 billion, while Eni said it would pay around $3.3 billion, giving ADNOC Refining, which has a total refining capacity of 922,000 barrels per day, an enterprise value of $19.3 billion.
The agreement includes output from the Ruwais Refinery, the fourth largest single site refinery in the world.
Win/Win
The new trading venture will expand market access for ADNOC Refining’s products with export volumes equivalent to approximately 70% of throughput.
“We are already well-positioned in Asia and we want to increase our market share there .... but this will also help us to have access to European markets and beyond,” al-Jaber said.
Eni has signed several deals in the Middle East in recent months as it expands outside Africa where it is the biggest foreign oil and gas producer.
The company’s CEO, Claudio Descalzi, said the partnership would increase its global refining capacity by 35%.
“This transaction, which allows us to enter the United Arab Emirates’ downstream sector...(will make) Eni’s overall portfolio more geographically diversified, more balanced along the value chain, more efficient and more resilient to cope with market volatility,” he said.
OMV described the deal, which is set to close in third-quarter 2019, as a major milestone in relation to its “Strategy 2025” plan. It said it would finance the deal primarily out of its cash flow.
“With (this transaction) OMV has established a strong integrated position in Abu Dhabi...spanning from upstream production to refining & trading and petrochemicals,” CEO Rainer Seele said.
Founded in 1971, ADNOC has undergone major change since al-Jaber’s appointment in 2016, part of wider economic reforms led by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan, who witnessed the signing of the three-way agreement.
Al-Jaber has embarked on privatizing its services businesses, ventured into oil trading and expanded partnerships with strategic investors.
Recommended Reading
Gunvor Group Inks Purchase Agreement with Texas LNG Brownsville
2024-03-19 - The agreement with Texas LNG Brownsville calls for a 20-year free on-board sale and purchase agreement of 0.5 million tonnes per annum of LNG for a Gunvor Group subsidiary.
FERC Approves Extension of Tellurian LNG Project
2024-02-19 - Completion deadline of Tellurian’s Driftwood project was moved to 2029 and phase 1 could come online in 2027.
CERAWeek: Two Minutes with EQT’s Toby Rice on Energy Security
2024-03-22 - EQT Corp. President and CEO Toby Z. Rice spoke to Hart Energy on March 20 on the sidelines of CERAWeek by S&P Global to discuss natural gas infrastructure bottlenecks, energy security and the company’s advances on LNG.
Commentary: Fact-checking an LNG Denier
2024-03-10 - Tampa, Florida, U.S. Rep. Kathy Castor blamed domestic natural gas producers for her constituents’ higher electricity bills in 2023. Here’s the truth, according to Hart Energy's Nissa Darbonne.
The Secret to Record US Oil Output? Drilling Efficiencies—EIA
2024-03-06 - Advances in horizontal drilling and fracking technologies are yielding more efficient oil wells in the U.S. even as the rig count plummets, the Energy Information Administration reported.