UAE Oil Giant Plans Natural Gas, Chemicals Investment Unit

(Bloomberg) -- The United Arab Emirates’s biggest oil producer will form an investment company for international natural gas, chemicals and low-carbon energy, three key businesses in the company’s global expansion push.

Abu Dhabi National Oil Co. will start the business, to be called XRG, in the first quarter of next year, according to a statement. The new firm will have an enterprise value of over $80 billion and will aim to more than double the value of its assets over the next decade.

Adnoc didn’t name top leadership for the new company or disclose details on budgets or funding for the new business and said it will hold a global strategy day next year.

The UAE is using its vast oil wealth to prepare the country for the energy transition, looking to create jobs and industries like tourism, technology and manufacturing, that can bring in income after the world moves away from using hydrocarbons. Part of that strategy relies on building up an international gas trading and chemicals businesses.

XRG will be a wholly owned unit of Adnoc, according the statement. Over the past several years Adnoc has spun off its retail fuels business, a domestic gas unit, its drilling arm and shipping and logistics provider. The company is also the majority owner of listed chemical producer Borouge Plc and owns most of fertilizer company Fertiglobe Plc.

Two years ago Adnoc announced that it was setting up a business line within the company to expand its international gas, chemicals and clean-energy operations. That business was eventually given a budget of $23 billion. The UAE has earmarked $150 billion for Adnoc to raise output of hydrocarbons while at the same time working to neutralize the effect of planet-warming emissions by mid decade.

Adnoc CEO Sultan Al Jaber sees gas as a cleaner alternative to meet rising energy needs of countries in Asia and Africa, with demand guaranteed for decades to come. Al Jaber last month clinched the region’s biggest ever acquisition of a European company when it agreed to buy German chemical maker Covestro AG for nearly $13 billion.

Oil producers like the UAE, and neighboring Saudi Arabia, are looking to chemicals as way to extend the use of their oil and gas resources. Those hydrocarbons can produce materials like plastics that make up the building blocks of consumer goods like mobile phones, computers and light-weight parts for cars or batteries.

The creation of the new business comes as Adnoc sees a 70% increase in global chemical demand by 2050 and a 65% rise in liquefied natural gas demand over the same period.

Both Adnoc and Saudi state producer Aramco have invested in LNG plants and global chemical facilities. Adnoc has taken stakes in LNG projects in the US and Mozambique and gas output in Egypt and Azerbaijan, while targeting additional chemical deals.

XRG will aim to be a top five global chemical producer as well as investment in low-carbon fuels like ammonia, Adnoc’s statement added.

(Updates with chemical and LNG demand increases in the ninth paragraph.)

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