Petrochemicals targeted in Abu Dhabi's downstream energy plans

Over the next five years Abu Dhabi National Oil Company (ADNOC), already one of the world’s biggest energy companies, plans to invest $45bn to become a global leader in the downstream segment, as part of its 2030 growth strategy. Central to this is the development of the Ruwais complex into the world’s largest integrated refining and chemicals site, a project that accounts for more than 40% of ADNOC’s capital expenditure budget. Particularly given ongoing investment in hugely capital-intensive upstream projects, this is indicative of how important downstream development has become to Abu Dhabi’s energy strategy. The end goal is straightforward: optimising the value that the emirate gains from each barrel of oil that it extracts.

Downstream Plans

Development of downstream energy infrastructure is expected to have a wide-ranging impact on the emirate’s economy, generating thousands of jobs and adding an extra point to GDP growth by 2025. ADNOC’s strategy for the segment combines a strong push for a broader and higher-value range of products, with a focus on greater efficiency, better use of capital, and creation of new partnerships.

In 2018 the company put a particular emphasis on expanding its downstream portfolio and re-orienting its businesses to capitalise on growth in high-value products, including petrochemicals. It aims to triple petrochemicals output to 14.4m tonnes per year by 2025 and, by the same date, expects to be refining nearly half of the crude oil produced in Abu Dhabi, with 20% of that amount going to the petrochemicals industry.

Exports to Asia have been a particular area of focus: the continent’s market for petrochemicals is expected to double by 2040, and two-thirds of new global demand for petrochemicals over the next 20 years is expected to come from there. ADNOC aims to capitalise on this growth, while ensuring that its supply chains are responsive to shifts in the global market.

To achieve this, the company aims to enhance performance, generate differential returns and strengthen competitive advantages. To this end, it will develop new products and revenue streams, investing strategically in a number of projects within a range of areas and segments. Improving economies of scale and efficiency will also help improve profitability, with ADNOC pursuing integration in its refining and petrochemicals businesses to capitalise on synergies.

New Opportunities

New partnerships with third parties are a key element of the company’s strategy, and investors are taking a keen interest in opportunities created by its long-term growth plans. ADNOC told OBG that it aims to build “a more international, integrated downstream presence that is underpinned by strategic industry partnerships, growth market investments and product trading,” and noted that going forward it would “work with partners who can bring access to financing, business and operational expertise, and knowledge and technological innovation, and secure better access to our key markets and customers.”

In addition to securing access to high-growth markets, ADNOC is looking for partners who can bring strategic added value, capital and innovative technology. All potential business partnerships will include an in-country value assessment to promote the use of local goods and services, and the employment of Emiratis, as ADNOC seeks to ensure the growth and diversification of its downstream activities supports the development of local suppliers.

Strategic Investments

The large-scale refinery at Ruwais, located some 240 km west of Abu Dhabi City, is central to ADNOC’s downstream development plans. The company aims to double the plant’s capacity through several new expansion projects. First among them is the construction of a new greenfield facility adjacent to the existing complex, which will specialise in petrochemicals and middle distillates, including jet and marine fuels, two products that are experiencing rapid growth in demand. The new plant will add another 600,000 barrels per day (bpd) in oil refining capacity.

Another key development is the $3.1bn upgrade of Ruwais Refinery West. The Crude Flexibility Project will adapt existing facilities to process up to 420,000 bpd of Upper Zakum crude and similar crude types. This will free up much of the Murban crude currently being refined for export, a strategic move as the commodity fetches a higher price on the global oil market.

Borouge

The Borouge petrochemicals plant adjacent to the Ruwais refinery is also playing a central role in downstream development. In line with its growth strategy, which aims to double production capacity by 2030, ADNOC and its long-term partner Borealis, an Austria-based petrochemicals producer, are moving ahead with plans to develop Borouge 4. The unit, due to come onstream in 2023, will include a mixed-feed cracker using existing available feedstock and downstream derivatives units to produce both polyolefin and non-polyolefin products. The cracker is designed to have a capacity of approximately 1.8m tonnes per annum (tpa) of ethylene and 2.5m tpa of polymers and will integrate with the three existing units and other ADNOC companies to optimise operational flexibility and efficiency. Products will include polyethylene and polpropylene, butadiene, benzene, pyrolysis gasoline and methyl tertiary butyl ether, which is used as an additive in gasoline and as a solvent.

In July 2018 Borouge awarded the engineering, procurement and construction contract for a new polypropylene plant – PP5 – to Tecnimont, a subsidiary of Italy’s Maire Tecnimont. The PP5, which will be integrated into the Borouge 3 complex, will have the capacity to produce 480,000 tpa of polyproplene, increasing Borouge’s overall capacity of the product to 2.24m tpa.

Projects Proliferate

In addition to these keynote projects, a number of others are also under way. In September 2018 ADNOC Refining commissioned a delayed coking unit as part of its carbon black and coker project (CBCP) at Ruwais. The CBCP is designed to extract greater value from heavy oils and slurry, allowing the company to recover highly specialised grades of calcined coke and carbon black from what would otherwise be low-value fuel oil. The CBCP will produce 430,000 tpa of anode-grade calcined coke for local aluminium smelters and 40,600 tpa of carbon black, some of which will be fed into Borouge’s integrated polyolefins unit, producing finished goods such as high-pressure pipes and steel pipe linings.

Meanwhile, ADNOC’s gasoline and aromatics project, which aims to increase gasoline production to ensure nationwide self-sufficiency, is due to be completed by 2023. It should produce 4.2m tpa of gasoline and 1.6m tpa of aromatics, using 50% of the naphtha that is currently exported, in another example of increasing in-country value. Just prior to this, in May 2018 ADNOC announced that it had signed a project development agreement with Cepsa, wholly-owned subsidiary of Mubadala Investment Company, for a new linear alkyl benzene (LAB) plant, following a successful feasibility study. The unit will be fully integrated into the Ruwais complex and use feedstock of benzene and kerosene to produce around 150,000 tpa of LAB, which is used in biodegradable detergents, as well as other cleaning substances and soaps. Cepsa has five decades experience of manufacturing LAB, so its participation should bring significant advantages in knowledge and technology transfer, as well as proving a strategic fit with Mubadala’s investments on behalf of the emirate.

Industrial Parks

The major new refining capacity will help support the development of two planned industrial parks, which are expected to play a key role as hubs for petrochemicals manufacturing. The Ruwais Derivatives Park has been designed to host downstream industries utilising production from the new gasoline and aromatics producing facilities, as well as the mixed feed cracker project. It will supply the Ruwais Conversion Park, which will host conversion industries utilising derivatives. These, in turn, will provide inputs for manufacturers of a range of end-products, further building in-country value. These could include packaging materials, flooring, wire, cables, electrical products and automotive parts. ADNOC hopes the parks will facilitate the creation and growth of small businesses.