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Abu Dhabi bets big on LNG

Adnoc will soon have access to about 21m tonnes of liquefied natural gas a year

A model of an LNG carrier displayed by China's Jiangnan Shipyard at a trade show last year. Adnoc placed a $1.2bn order with the shipbuilder for six such vessels Reuters/Chris Helgren
A model of an LNG carrier displayed by China's Jiangnan Shipyard at a trade show last year. Adnoc placed a $1.2bn order with the shipbuilder for six such vessels

When Sheikh Zayed, then ruler of Abu Dhabi, ordered the establishment of Adnoc LNG in 1970, his motivation was to stop the wasteful flaring of gas from oil operations.

More than 50 years later, Adnoc has just taken an investment decision on its second liquefied natural gas plant.

The UAE became the first in the Gulf and just the sixth LNG-exporting country worldwide in 1977 with its Das Island plant, with 6 million tonnes per year of capacity. For decades since, LNG has been just an adjunct to Adnoc’s primary business of producing oil and serving the domestic market for gas.

But the new Adnoc, under Sultan Al Jaber who became CEO in 2016, knows that to be a leading international player, it needs a stronger gas business. 



The future of oil may be clouded by its carbon intensity and the rise of electric vehicles.

Gas, with about half the carbon emissions of coal, and comparatively clean-burning, is crucial for the next couple of decades of Asia’s environmental and climate progress. Meanwhile Russia’s self-sabotage of its gas sales to Europe leaves a gap for reliable suppliers.

In March 2023 Adnoc Gas, combining the company’s gas processing and liquefaction operations, was listed on the Abu Dhabi Securities Exchange.

Five months later in August, Adnoc took a 30 percent stake in the Absheron gas field in Azerbaijan, which will supply Turkey and Europe by pipeline.

In November 2023 it announced it would de-bottleneck the Das Island facility to add another 0.9 million tonnes of capacity.

This February, it formed a joint venture with BP, focused on gas in the East Mediterranean, and BP contributed its Egyptian gas assets to the partnership. The two have had, however, to suspend plans to take over Israeli gas company NewMed, firstly over valuation issues, then because of the Israel-Gaza conflict.

In May 2024 Adnoc bought 11.7 percent in NextDecade’s Rio Grande LNG project in Texas, and agreed to take 1.9 million tonnes per year of LNG from the plant. 

In its most recent deal, it bought 10 percent from Portugal’s Galp in Area 4 in Mozambique, which contains the Coral South floating LNG plant and could eventually produce 25 million tonnes annually.

Finally last week Adnoc took the final investment decision for its 9.6 million-tonne new plant at the western industrial hub of Ruwais. It also awarded a $5.5 billion construction contract to a consortium of engineering firms.

The new facility has trodden a winding path – until May 2023, it had been intended to be located in Fujairah on the UAE’s east coast. But it should now start operations around 2028.

Ruwais is intended to produce in a low-carbon manner, using electrical drive from solar and nuclear power and cutting methane leaks to a minimum.

The geography of Adnoc’s LNG assets is important

At that point, and not assuming any further deals, Adnoc will have access to about 21 million tonnes per year of LNG.

For comparison, BP, already a partner in Das, expects to have 25 million tonnes by 2025. Malaysia’s state company Petronas has more than 30 million tonnes currently.

Saudi Aramco is also on the LNG deal-making trail, having in September bought some minority stakes in Australian assets. It just agreed to purchase LNG from NextDecade, and is rumoured to be talking to Tellurian over a struggling project in Louisiana. But it lacks a domestic position.

So Adnoc will have a significant role, but it needs more to be one of the world leaders in LNG. It should have a domestic gas surplus by the late 2020s, but probably not enough to commit to more large export projects.

And no one can compete with next-door neighbour, Qatar. By 2030, QatarEnergy’s LNG capacity from its colossal North Field should reach 142 million tonnes, not to mention its 70 percent stake in the 18 million tonne Golden Pass project in Texas.

The geography of Adnoc’s LNG assets is important. The LNG world is divided into the Pacific and Atlantic basins, with little flow between them. The disruption to the Red Sea because of attacks on shipping reinforces this division, for as long as it lasts.

The UAE plants and Mozambique are well-sited to supply the Pacific, particularly the growing markets in the Indian subcontinent.

But Ruwais also has contracts with two German buyers, and this is where the NextDecade deal is likely to come in. It gives Adnoc the ability to swap its US volumes to avoid the need to deliver directly from the UAE to Europe.

The LNG market is likely to be over-supplied in the late 2020s because of massive expansions in Qatar and the US. Prices agreed for new contracts are already softening.

It should be a good time for risk-tolerant and ambitious players to pick up stakes in LNG projects that need financial backing to get off the ground, particularly in North America and Africa.

The ability to access markets is crucial. So too are positions in physical and contractual assets – not just liquefaction plants, but tankers and import terminals – around which a company can generate additional value by trading.

We can expect Adnoc to strike more deals, perhaps in gas by pipeline as well as LNG, as it seeks to emulate its international peers.

Robin M Mills is CEO of Qamar Energy and author of The Myth of the Oil Crisis

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