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Adnoc drops plan to upgrade UAE’s only LNG facility

Adnoc LNG Adnoc
Adnoc's main domestic priority has become the Ruwais LNG project
  • Emphasis now on greenfield
  • Priority is Ruwais LNG project
  • Shares rise after announcement

An upgrade of the Das Island liquefied natural gas plant has been cancelled by Adnoc Gas, as it shifts priorities towards greenfield developments.

“We have a funnel of exciting opportunities in which we can invest while at the same time exercising capital discipline,” Adnoc Gas said.

Das Island’s liquefaction and export terminal, the only LNG facility in the UAE, has been operating since 1977. 

It has a capacity of 6 million tonnes a year (mtpa), supplying LNG from gas produced in Adnoc’s offshore operations to clients around the globe, including India, Japan and China.

The upgrade scheme, known as LNG 2.0, was developed with TotalEnergies of France, BP of the UK and Mitsui in Japan as part of the UAE’s larger strategy to expand LNG production and exports. 

Adnoc Gas plans to boost its LNG output capacity by more than 8 percent by 2028, and increase production capacity by 30 percent in the next five years.

The project, abandoned at the basic engineering stage, was intended to remove bottlenecks in the existing LNG facilities, add 0.9 mtpa of LNG capacity and electrify LNG trains to reduce greenhouse gas emissions.

Adnoc Gas also planned to increase ethane extraction by 1.2 million tonnes a year to export it as petrochemicals feedstock to Borouge in Ruwais.

However, Adnoc has been suffering from gas quality issues at Das Island.

Facts Global Energy (FGE) told AGBI in March that Das Island cargoes’ sulphur and ethane content “have limited the number of customers and markets for Abu Dhabi’s LNG supply”.

Although the company said it would continue investing in Das Island to maintain the production and facilities, its main domestic priority became the Ruwais LNG project.

Siamak Adibi, FGE’s Singapore-based principal consultant, said he believed that Adnoc has carefully considered opportunity costs. “We should note that the LNG 2.0 could be an expensive project for a small incremental LNG supply,” Adibi said.

In June Adnoc announced the final investment decision for the Ruwais plant, which will have two LNG trains with a combined 9.6 mtpa capacity, boosting the UAE’s LNG export capacity to 15 mtpa.

The project, which will become the country’s largest LNG export terminal, will complement Adnoc’s portfolio, Adnoc Gas said. 

In July Adnoc awarded shares of a 40 percent minority stake to TotalEnergies, Shell, BP and Mitsui, while it retains a 60 percent stake in the project.

Strong results

Ruwais LNG has secured offtake agreements accounting for around 70 percent of its output capacity or approximately 4.2 million mtpa.

Adnoc Gas, which is ​​listed on the Abu Dhabi Securities Exchange (ADX),   reported strong financial results for the second quarter of 2024, achieving a record net income of $1.2 billion, a 21 percent year-on-year increase.

In April it announced plans to invest more than $13 billion in domestic and international growth by 2029. The company is pursuing an aggressive expansion strategy to increase its global presence in the LNG market.

It has been buying stakes in LNG fields in regions such as Europe, India, China, South East Asia and Africa.

Since its listing, Adnoc’s stock price has risen up to 50 percent. Over the past week it has shown some volatility, but it increased by nearly 2 percent since the cancellation of the Das Island project, trading at AED3.22 on Friday morning.

McKinsey’s 2050 global gas outlook predicted that the world would need around 100 million metric tons of additional capacity to meet both demand growth and a decline in production from existing projects.