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Adnoc chasing global growth with latest venture

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The decision was taken to increase the stake in Adnoc Gas's offering based on significant investor demand across all tranches
  • Vertical to focus on low carbon solutions and international growth
  • Oil companies under pressure to support zero carbon agendas 
  • UAE wants to boost green credentials before hosting Cop28 next year

Abu Dhabi National Oil Company (Adnoc) is creating a dedicated unit for low carbon solutions and international business.

It is an attempt to monetise the decarbonisation strategy mandated to it by its board and the wider UAE government. 

But the company must ensure that any future overseas work does not cannibalise that of the Abu Dhabi sovereign wealth fund Mubadala or its other partners, analysts noted. 

Adnoc announced on Monday it is setting up the Low Carbon Solutions & International Growth unit, to be headed up by Musabbeh Al Kaabi, currently chief executive of Mubadala’s UAE investments platform, from January. 

Al Kaabi will serve as executive director of the new division, which will focus on renewable energy, clean hydrogen and carbon capture and storage, as well as on international expansion in gas, liquefied natural gas (LNG) and chemicals. 

“Adnoc has historically had very little overseas activity, unlike [Saudi Arabia’s national oil company] Aramco,” Robin Mills, chief executive of Dubai-based Qamar Energy, said.

“Making Adnoc into a serious international gas player probably requires building the international asset portfolio.”

He added: “It will be interesting to see exactly what the remit is and how it avoids overlap with Mubadala. The unit is focused not just on low carbon but on gas and chemicals.” 

As part of the UAE’s net zero plan to reduce carbon emissions by 49 percent by 2030, 60 percent by 2040, and 100 percent by 2050, Adnoc has drawn up its own decarbonisation roadmap to reach net zero status within the same timeframe. 

Musabbeh Al Kaabi, chief executive of Mubadala’s UAE investments platform, will become executive director of Adnoc’s new Low Carbon Solutions & International Growth unit

In 2021 it announced plans with two partners – Abu Dhabi National Energy Company (Taqa) and Mubadala Investment Company – to combine their renewables and green hydrogen operations into the Abu Dhabi Future Energy Co, otherwise known as Masdar, and boost renewable energy capacity to more than 100gw, from 23gw, by 2030.

Adnoc also aims to increase its carbon capture capacity by more than 500 percent to around 5 million tonnes per year by 2030, by taking additional CO2 from its gas processing plants and other sources of carbon emissions. 

The company is working to eliminate routine flaring of natural gas across its operations and recently set an upstream methane intensity target of 0.15 percent by 2025, the lowest in the Middle East, to further reduce emissions.

Adnoc said in January it had become the first hydrocarbons company to source 100 percent of its grid energy from clean nuclear and solar power.

It is expanding its use of clean grid power offshore by building a $3.6 billion sub-sea network connecting Adnoc’s operations to the UAE’s electricity grid – a first for the Middle East and North Africa (Mena) region, it claims.

Once complete the network will reduce their offshore greenhouse gas emissions by more than 30 percent. 

The new Low Carbon & International Growth division is an attempt to consolidate this work into one business unit.

“[This new vertical] builds on our successful track record in responsibly and sustainably supplying energy to the world, and will play an important role in advancing the company’s ongoing transformation, which has included a focus on the decarbonisation of its operations, energy efficiency, [emissions reduction], and the use of renewable and other zero-carbon energy sources,” the company said.

Cop climate summit commitments

Most GCC countries have made commitments to the international community – through Cop27 or elsewhere – for their target date of reaching net zero status.

Given that national oil companies (NOCs) are among the most significant sources of carbon emissions in their economies today, this has now placed pressure on them to develop their own strategies to support national targets, observed James Thomas, partner at Strategy& Middle East, who specialises in the oil and gas industry.

“During the course of developing these roadmaps, NOCs have noticed that the decarbonisation agenda is not only a perceived threat to their business, but has potential for very substantial new business opportunities that could provide new revenues streams for the country if and as oil revenues potentially start to fall away over the coming decades,” Thomas said. 

“For example, if you’re capable of capturing and storing your own emissions, then you could sell this as a service to other industries that are considered hard to abate, like iron and steel, cement, power etc.

“There are also still some technical challenges and questions that need to be solved to commercialise some of these solutions – for instance, what’s the best way to synthesise green hydrogen, transport it around the world, and get it to customers?”

As a result, there are an increasing number of NOCs, sovereign wealth funds, national power companies, and national industrial investment champions partnering and starting to create vehicles to invest in decarbonisation ventures and research, Thomas added. 

“Given the increasing pace and momentum behind the global environmental/decarbonisation agenda – plus with the next Cop28 being hosted by the UAE – the Emirates in particular sees this as perfect timing to seize the moment and get the foundations in place to be able to do something bold over the coming years.

“Unlike many other parts of the world, they have the financial resources to actually do this.”

Jeffrey Beyer, managing director of Zest Associates, a Dubai-based consultancy that develops sustainability solutions for governments and companies, agreed. “Adnoc forming a new vertical focused on clean energies and low carbon solutions shows that the UAE is pulling out the big guns to advance its low carbon agenda as it gets ready to host Cop28 next year,” he told AGBI.  

“Adnoc has a colossal budget and deep engineering expertise that it can use to develop technologies like renewables, clean hydrogen and carbon capture and storage.

“To continue to prosper, companies need to find new ways to leverage and adapt their existing capabilities to thrive in a net zero future.

“The fact this new vertical will be led by Musabbeh Al Kaabi from Mubadala also shows that the UAE is willing to share talent across its most influential companies.”

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