Adnoc Gas awards $550m contracts and transfers $2.4bn pipeline expansion project to Adnoc

Adnoc Gas, the integrated gas processing unit of Adnoc, has awarded contracts worth $500 million for the next phase of the UAE's gas pipeline expansion, while also transferring the ownership of the project to its parent company.

The engineering, procurement and construction contracts for the UAE sales gas pipeline network enhancement project, called Estidama, were awarded to NMDC Energy and Galfar Engineering & Contracting W. L. L Emirates, Adnoc Gas said on Monday in a statement on the Abu Dhabi Securities Exchange, where its shares are traded.

Meanwhile, the ownership transfer to Adnoc will help in “significantly optimising Adnoc Gas’s capital efficiency”, it said.

Adnoc Gas will continue to manage Estidama with Adnoc covering the capital expenditure for the infrastructure project.

Estidama will extend the pipeline network from approximately 3,200km to more than 3,500km, and enable the transportation of higher volumes of natural gas to the northern emirates.

The project will bring “lower-cost and sustainable natural gas to more locations across the country”, said Ahmed Alebri, chief executive of Adnoc Gas.

The company is playing a “leading role in meeting the growing demand for gas across the country and enabling the UAE’s goal of gas self-sufficiency”, he added.

Adnoc Gas will be paid to operate and maintain Estidama on behalf of Adnoc and will pay its parent a variable transmission fee for actual throughput of the pipeline.

In April, Adnoc Gas said it plans to invest more than $13 billion until 2029 to pursue domestic and international growth opportunities amid expansion of its liquefied natural gas (LNG) production capacity.

The company aims to more than double its LNG output capacity by 2028 through the strategic acquisition of the new Ruwais LNG plant from parent company Adnoc and potentially target assets in Europe, India, China and South-east Asia, Adnoc Gas said.

The Ruwais project will more than double Adnoc's UAE production capacity of LNG to about 15 million tonnes per annum.

Currently under development in Abu Dhabi’s Al Ruwais Industrial City, it will consist of two 4.8 million tonnes-per-annum LNG liquefaction trains with a total capacity of 9.6 million tonnes per annum. Start-up is expected in the second half of 2028.

Last week, it was revealed that international energy majors BP, Japan’s Mitsui, Shell and TotalEnergies will each be awarded a 10 per cent equity stake in the Ruwais LNG plant.

“In addition to taking a majority equity stake in Ruwais LNG [from Adnoc], Adnoc Gas will oversee its construction and operate the world-class plant after it is commissioned in 2028,” Mr Alebri told The National at the time.

State-run energy companies in the Middle East are betting big on LNG, seen as a low-carbon alternative to crude oil and coal.

LNG is seen as a cleaner alternative to other fossil fuels, and countries such as India and China are hoping to grow the share of natural gas in their energy mix.

Global LNG demand is projected to increase by more than 50 per cent by 2040, driven by industrial coal-to-gas switching in China and increased LNG use in South Asian and South-East Asian countries to support economic growth, according to Shell’s LNG Outlook released in February.

Adnoc Gas, which has access to 95 per cent of the UAE's natural gas reserves, signed LNG export agreements worth up to $12 billion in 2023.

Last year, it also awarded contracts worth $4.9 billion to expand its processing capacity.

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