Abu Dhabi National Oil Company, the state-controlled oil and gas major, took the next step in growing its downstream operations by commissioning a new unit to extract maximum value from the heavy oils and slurry, to make products that will be marketed in the UAE and abroad.
Adnoc Refining, a subsidiary of Adnoc, has completed the commissioning of a specialised coker unit that will allow the company to get value from “bottom-of-the-barrel” as it aggressively pursues its downstream strategy, the company on Sunday.
The new unit will enable Adnoc’s refining business to recover highly specialised and valuable grades of carbon black and calcined coke – the compounds used in tyres and rubbers, and the steel and aluminium industries, respectively.
“Not only will it create higher value from what would otherwise be used for low-value fuel oil, but both products are essential to industrial processes within Adnoc subsidiaries and other UAE industries, potentially removing the need to import costly raw materials,” the company said.
Through its Carbon Black & Coker Project, Adnoc Refining can produce 40,600 tonnes of two different grades of carbon black per year, and 430,000 tonnes of anode grade calcined coke, which is low in sulphur and metals. Borouge, a joint venture between Adnoc and Austria’s Borealis, makes extensive use of special carbon black grades across a range of products, including high-pressure water and gas pipes, steel pipe coatings and linings, and standalone piping.
Calcined coke is a key ingredient in anodes used in the electrolysis process that separates pure aluminium from bauxite ore. The UAE is the world’s sixth-largest aluminium producer, accounting for over 50 per cent of the Arabian Gulf’s output, with annual production of 2.6 million tonnes in 2017, the company said.
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Increasing the flexibility of Adnoc’s refining assets to extract the most value from every barrel of oil it produces and generate additional feedstocks and additives for the petrochemical industry are the pillar of the company’s downstream expansion strategy. The plan aims to not only solidify Adnoc’s position as a producer, but also transform it into a supplier and trader of refined and petrochemical products as it focuses on growth markets in Asia, including China.
Adnoc’s investment programme will see the company’s refining capacity increase by more than 65 per cent, or 600,000 barrel per day by 2025, through the addition of a third refinery, creating a total capacity of 1.5 million barrels per day. The new refinery will significantly increase the output of Abu Dhabi’s refining operations by adding to the range of crudes that can be processed.
“At the heart of our downstream strategy is an Dh165 billion investment, over the next five years, that will create the world’s largest integrated refining and petrochemicals hub in Ruwais, where Adnoc will convert 20 per cent of its crude to chemicals, tripling petrochemical production capacity to 14.4 million tonnes per year, by 2025,” said Abdulaziz AlHajri, director of Adnoc’s downstream directorate.
“In parallel, Adnoc intends to build an international, integrated downstream presence, including securing additional crude refining capacity in growth markets.”
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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